Do residential rental properties with one to four units and second-home mortgages carry more risk?…
2020 is shaping up to be an interesting year in the ski industry. The ski industry was abruptly cut short in April with Vail resorts losing 200m and Alterra getting sued for closing early. What does this mean for ski real estate? Where should you invest now based on the recent pandemic (hint, the pic above was taken at one)? Long term what does this mean for the ski town investments?
Before getting into the top 2 Colorado ski towns it is important to refresh a little on what is happening in the industry. The recent industry changes will drive real estate into the future.
Major Ski Industry Changes
To refresh on what is happening in the industry. If you missed the news, there have been several purchases/mergers involving many Colorado ski resorts. Below, I’ve highlighted the big four in Colorado. Each of these will have a substantial impact on real estate in their respective markets. If the purchase of Eldora by Powdr corporation is indicative of the future, look for KSI (Aspen group, Alterra) to put substantial money into Winterpark and Steamboat over the next several years.
- Vail Resorts buys Crested Butte, this purchase closed late 2018
- Aspen buys WinterPark and Steamboat (and some other resorts like Mammoth)
- Copper (Powdr corp) buys Eldora
- Purgatory is sold to James Coleman (local Durango resident)
- Telluride joins Epic Pass
- Arapaho basin dumps vail for a date with Alterra (7 days)
The risk from Coronavirus to the ski model.
As you can see above, the ski model is that the two top players, Vail and Alterra are getting bigger bringing in more resorts not just in Colorado, but throughout the country and world. For example, Vail owns resorts in Australia and Canada that are on the Epic Pass and the Ikon pass is valid in Japan, Australia, Chile, etc… The ski model today is predicated on one pass for access to all the various locations. Someone in Australia would buy a pass for their home mountain and then take a trip to Aspen or Steamboat. Ironically some of the first cases of Coronavirus in Aspen and Steamboat came from Australians.
The virus changes the viability of the ski model in the short term. For example, Australia and New Zealand have closed their borders to non-residents. How would one use the Epic or Ikon Pass? More importantly the mountain communities both companies operate in do not have nearly the infrastructure to deal with a pandemic. For example, there are fifty intensive care beds in Vail. What happens when the town swells from 6k full time residents to 60k during the holidays with travelers from all over the United States and various international destinations?
The million-dollar question is what happens in the long term. Eventually there will be a vaccine for the Coronavirus, but unfortunately this will not solve all the issues. Many questions remain including will this new virus change similar to the flu every year? Have we entered a new era of pandemics that will cycle ever year? Every 10 years? The answers to these questions will determine the fate of the “bigger is better” ski industry.
What are the top 2 Colorado ski town investments for 2020?
Although I am focusing on the top two resorts, pretty much all ski real estate near a major resort is going to be a good long-term investment as inventory is severely constrained and the areas will remain desirable for their recreational amenities.
One of the primary reasons I chose the top two markets is because of the trends I see unfolding with the Coronavirus. Both Aspen and Steamboat have become highly desired locations to ride out the pandemic attracting homeowners from all over the country to their second homes. I’ve heard from hundreds of homeowners how “thankful” or “lucky” they are to have a place in Aspen or Steamboat as opposed to NY, Miami, LA, etc… This desirability in the pandemic will translate into healthy long-term real estate markets.
- Aspen: Aspen is the premiere destination in the world for high net worth buyers. This will continue into the future. Aspen is unique from many resorts in that it is an actual town with a thriving city and full-time residents. Furthermore, it is far enough away from Denver to deter day trippers keeping its volume of tourists a bit more manageable. The high net worth buyers will continue to migrate to areas like Aspen with world class amenities.
- Steamboat Springs: Steamboat was on my list last year and will continue into 2020. Steamboat is a unique market that is growing exponentially in the summer time as well. It is substantially undervalued compared to places like Vail and therefore much more attractive to many buyers. The market should continue to appreciate nicely as supply is nonexistent and demand continues to increase. Steamboat has a thriving full-time population with great schools and all the amenities of much larger markets.
The coronavirus pandemic has caused a seismic shift in ski real estate. Second homes in resort markets have gone from a nice to have to a requirement for many high net worth individuals to a must have for the safety and security of their families. Property owners in Aspen and Steamboat have flocked to their second homes to ride out the pandemic in comfort with open space, world class medical, and considerably less risk as opposed to a large city.
How can a Colorado hard money loan help with your Colorado ski town investment?
Every year I write the list of best ski town investments from personal experience. I spend considerable “windshield” time looking at transactions in both the front range and various ski towns throughout the state of Colorado. Each mountain town is unique with its own unique submarkets. Understanding these submarkets is the key to real estate success.
This intimate knowledge of the various ski towns in Colorado allows us to understand the uniqueness of each submarket to structure a transaction that fits your needs. Furthermore, all three of the markets above are “hot” markets with limited inventory. Time is one of the most important factors in getting a transaction closed. We can close transactions in 5-10 days. We can also lend on properties that don’t qualify for traditional financing like nightly rentals/ condos that can’t qualify for government loans and have made loans on many commercial properties that don’t fit bank guidelines. For example, we loaned on a partially occupied commercial property in Telluride that had an outstanding location but couldn’t cash flow for traditional bank financing. As you are looking at the mountain communities and have questions feel free to contact me.
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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.
Fairview is the recognized leader in Colorado Hard Money and Colorado private lending focusing on residential investment properties and commercial properties both in Denver and throughout the state. We are the Colorado experts having closed thousands of loans throughout the state.
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