With the failure of proposition HH, the Colorado legislature is on the hunt for tax…
There is a condo complex in Steamboat where units have precipitously dropped in value while owners cannot sell, refinance, or in many cases use the units. The units themselves are fine, but there is one huge problem. What happened in Steamboat? Why is this a cautionary tale for buying in ski towns? What 4 items should you always look for in Colorado ski real estate?
What happened in Steamboat
I’ll give you the quick summary. A condo complex near the base of the mountain no longer has parking. There is a dispute with the owner of the parking structure where the complex has a 98 year lease. Essentially the parking structure was condemned by the city for engineering issues and the owner of the property has not repaired. Furthermore based on the article it is questionable as to the maintenance agreement on the parking structure. It does not look like the parking issue could be resolved for years if ever as the current property with the parking structure is set for redevelopment at some point.
Here is what a member of the HOA said: “The units are not rentable or sellable during this period of no parking,” Fresques said. “I had a real estate agent reach out to me about a potential sale, and he wanted a clarification on the parking. It’s a mess that impacts the whole community. It’s the result of the Ski Time Square community trying to do the right thing for its residents.
Furthermore, it is likely not possible to refinance or even occupy the units without any parking. Unfortunately there are few if any available overnight parking anywhere close to the property or within the city limits. Long and short, this is a huge problem for property owners and not unique to Steamboat. Parking is only one of the 4 critical items to watch before buying Colorado ski real estate.
4 items you should always watch for In Colorado ski real estate
Colorado ski real estate is unique. If you are not careful and/or know what to look for you can quickly lose money and/or usability of the property.
- Parking: This is a no brainer. Every ski town is parking constrained so understanding the parking situation is a must. How many cars can you have, where is the parking, is the parking owned by each unit, can you park on street vs. off street, etc… Parking or lack thereof can make or break a real estate deal in the mountains.
- Deed Restrictions: In every ski town certain properties have various deed restrictions including income restrictions, full time work within the city/county, ability to rent to only locals, the number of days you can live in the property (this is common in many condotels), etc….
- Building envelopes/ability to build/remodel: Doing anything in real estate in a ski town is challenging. There are huge space constraints and tons of regulations. A few to watch out for:
- Building envelopes: most ski towns have specific building envelopes, this means that you can only build in a certain part of the lot. For example you could have ½ acre lot but only the front 5k feet is buildable that is 10 feet from the street.
- Setbacks/height restrictions: Each lot likely will have setbacks from the lot lines that will further limit the building, furthermore most have height restrictions limiting the amount of square footage
- Ability to build/remodel: Even if you buy an existing home, many ski towns have limits on adding additional square feet and make it so that you cannot tear down the existing structure. For example, Aspen only gives a handful of demolition permits a year so you could wait years if not eternity to do a remodel that adds considerable square footage.
- Nightly rental regulations: Almost every Colorado ski town has proposed nightly rental regulations. From prohibited zones to limits on the number of nights a property can be rented to additional nightly rental taxes to limiting the number of licenses. If you are buying with the intent to rent, these regulations are critical. For example, in Breckenridge in certain areas there are no nightly rental licenses available. Nightly rentals regulations are not only critical for prospective renters but any buyers. For example, if you wanted to live full time in a ski town, you likely do not want to be in an area with unlimited nightly rentals, you would want to be in an area with other locals/long term residents.
Colorado ski towns are unique: Bring in an expert
I live full time in the mountains and have for years. I have done hundreds of loans throughout Colorado ski towns from Steamboat to Telluride and everywhere in between along with own real estate in many markets. If you do not live/work in the particular ski town you are interested in, ensure you bring in an expert that does. It is difficult if not impossible to protect yourself without intimate market knowledge.
Each Colorado ski town is so unique. It is very different buying a property in Breckenridge than in a uniform neighborhood in Denver or Castle rock. Specific market expertise is absolutely critical when you are looking to buy a property in the mountains. You do not want to end up with a property you thought you could short term rent and now you cannot or a property you wanted to build a dream home on that doesn’t fit with the regulations. Colorado ski real estate is still a great investment, but the recent issue in Steamboat regarding parking for a condo complex should serve as a cautionary tale that you must do your homework and bring in an expert if needed.
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Written by Glen Weinberg, Owner 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 Bloomberg, Businessweek ,the Colorado Real Estate Journal, National Association of Realtors Magazine, The Real Deal real estate news, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
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