Does it Ever Make Sense to Buy a Mountain Property?

About 10+ years ago Erin and I considered buying a mountain property. We loved the idea of a weekend retreat, especially for skiing. However, every time I looked at the numbers I just couldn’t justify a decision based on pure indulgence and little economic support.

We ran the numbers like this: We estimated how many days we thought we would use the condo over a given year. Then we subtracted 10% because we knew that we actually would use the place less than we thought we would. Next, we estimated our total costs of owning for 365 days and then calculated the per visit cost to our condo. We did not add in any third party rentals because we weren’t willing to give up spur of the moment trips. My thought was if we are going to indulge ourselves fully, we can’t worry about renters interrupting our weekend plans! Our analysis did not included any factor of appreciation because we did not want to count on that, and at the time, the mountain properties were over priced and I didn’t feel secure in factoring in appreciation.

The result of our research was that it was going to cost us less per night to stay at a luxury hotel each time we visited the mountains than it would to own a mountain house. Why buy a condo when you can stay in a nice hotel where someone else does the laundry and cleans your room. Plus, we wanted the freedom to visit different ski areas instead of always the area next to our condo. In the end, we didn’t bother buying a mountain condo.

Looking back on the previous ten years I can honestly say we’ve probably stayed in a mountain hotel less than 10 times (and most of those were for summer soccer tournaments). Oh, and we really never ski anywhere else than Mary Jane. So much for our mountain condo analysis. How do I feel about my decision not to buy a mountain condo 10 years ago? Well, actually pretty good. Like Denver, the mountain real estate market has seen some drastic changes of the last 10 years. Back then the properties were at peak prices, and interest rates weren’t nearly as low as they are now. Things are definitely changing.

The current mountain market is ripe for buyers. The mountain areas always lag behind Denver when it comes to market recovery. While we saw Denver home prices and sales skyrocket the last couple of years, the mountain property market is just coming into recovery. I’ll give a couple of examples. If you bought a condo in Keystone during the peak sales (around 2006) the average was about $500,000. Now the average price is around $300,000. Avon had a similar market correction, peaking around 2006 and dropping 58% from those peak prices. What goes up must come down, right? Well, the opposite seems also to be true. In most mountain markets we have reached bottom, and the prices are now recovering.

With the nutty low interest rates it’s definitely time to re-examine whether it makes sense to buy a mountain property. Take a look at the example below to see how a mountain property purchase is actually more than a self indulgent exercise. These returns are beating the stock market.

Want to learn more about mountain properties? Contact me. I will provide you with detailed analysis of the Summit County and Vail Valley markets and introduce you to the two brokers in our office who know the mountain properties inside and out.

These above estimates assume you use the unit 20-25 nights a year and rent 100 +/- nights (with a property manager handling ALL details).
Note:  Based on actual client experiences and current market prices. Your results may vary, of course.
Source: Summit MLS, Vail MLS, interviews with owners and property managers; YCRE analysis.
Numbers are net of property management fees.