I learned the hard way about investing in mountain towns. I successfully lost over 100k on my first ski investment property! Hindsight 20/20 I violated 1 of the 4 golden rules of investing in mountain property. I developed these 4 rules after evaluating thousands of mountain/ski/resort properties throughout the state of Colorado and personally losing money.
As a ski town private lender (I also lend in Denver and the front range) I currently spend about half my time in the mountains and half in the front range looking at real estate. I’m amazed at how many people including myself violate one of the 4 rules below and end up losing money on their investment. With the lofty prices of real estate, it is more imperative than ever to ensure you are right on your investment and you don’t violate any of the rules below.
- What is your objective? Are you looking for a weekend place on the ski slopes? A weekend rental condo? A summer retreat? A passive investment? It is imperative to define your objective to ensure you buy a property that meets the objective. For example, if your goal is to have rental property for income, a one bedroom condo might be ideal to maximize your return. While on the other hand if you have 6 kids and plan on using the condo it might not be the ideal investment!
- Close may not be close enough: This is how I lost allot of money. I thought if I bought something South of Breckenridge that ultimately the value would increase. This didn’t happen over an almost 10 year period and likely never will. When looking at investing in ski real estate, location is the number one factor. I’m not saying you should only buy a property that is ski in ski out, but the closer you are to the main attraction, the better your investment will likely be. The number two factor in ski investing is view. Buyers want a nice view of the mountains, river, etc… not having a view can substantially depreciate the property value.
- Bigger is not better: There is the old adage that bigger is better. When buying in mountain towns a bigger property does not mean a better investment. Many buyers in ski towns are looking for houses under 4 or 5k feet that are laid out efficiently. There is not much demand for the 25k foot house that is expensive to maintain (heat, maintenance, furnish, etc..). Many of these houses are selling today well below their build cost. If you look at the last crisis, the “huge” mountain homes took a beating and took a long time to sell and sold at larger discounts than their more modestly sized peers.
- Do not buy the mountain “cabin”: The modern look is the popular style now. The rustic/log look with river rock is definitely out. When looking at a property make sure you are getting a more modern style and avoid log homes. Log homes, in many cases, don’t age well and are in much less demand than traditional timber frame or stone accented house. For example, I’ve been watching a house on the market that easily cost 6m to build that they are trying to sell now at 3m, it has been listed for 4 years. Rustic is okay, but it needs to be a blend of modern touches.
Please keep Colorado hard money in mind for all your mountain investing needs. We can lend on condos, townhomes, single family homes, nightly rentals, ranches, commercial properties, marijuana properties, vrbo, Airbnb, etc… We know the Rockies and can get your loan funded quickly.
Written by Glen Weinberg, COO/ VP Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in the Colorado Real Estate Journal, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
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