Seeking advice on Ski town investment property

2 Replies

I've been mulling a decision and have not gotten any solid advice from my in-person network so I'm looking to the BP forum! I currently rent a 2B/2B in Breckenridge, CO. It's clear that this will not be a permanent home as my wife wants to live closer to family/friends as we're expecting our first child in October. We really love Breckenridge and we want to make it our vacation destination with our kids in the future. If it were up to me, I would live here permanently. 

I am considering buying an investment property here that we can use personally for a few weeks a year or offer the option to live here or spend 1-2 months per year in the future as well if we wanted to do that. The market here, like the rest of the US, is very strong. I have approached our landlord about purchasing his condo and he is open to the idea. He is looking for "something in the mid-700's; a realtor friend of mine said we can possible receive $800k." I don't think he's wrong, this market is currently very strong here.

I have approximately $200k in non-retirement assets that would incur some capital gains tax if I were to sell ($200k post-tax). Assuming I can put $200k down, my monthly PITI+HOA would be $3,600/mo. The property would gross well over that amount and I am fairly confident it would be at least breakeven with a freelance property manager.

My wife and I don't plan on buying a permanent residence as we like renting for the flexibility and convenience. We also have an investment property that can appraise around $450,000 with $320,000 on the mortgage balance.

My question is whether I should pursue a second property or consider a 1031 exchange with my existing property? My second question would be whether the strong market should deter me from buying and consider renting short term when visiting Breckenridge in the future?

@Hewitt Tomlin , I like how you've identified some of the key elements that really boil down to a lifestyle vs business decision.  

1. I don't think you would have to sell much taxable investments if you went the route of selling your investment property and 1031ing into the condo .  The cash from the condo would provide most of a down payment.  And if you're buying it as the tenant you can probably structure the purchase to delay until you've got the rest of the cash saved up or to help time your 1031.  So that part is pretty much in your favor.

2. You've got to really crunch the numbers though to see if you can make money with that vacation condo.  Many folks get enamored with an area and get locked into a property only to find that it only produces just enough net income each year to fund their free vacation at that house.  Nothing wrong with that but you're selling a producing real estate asset to get it.  You could be giving up enough income to rent a vacation place and more - and have the flexibility of doing it anywhere if Breck ever didn't feel like the place.

My intuition would be that as an investment, lower-end residential properties in other areas would produce more cash flow and ROI with less work/management on your part.

Breakeven cash flow projection would be a concern for me from an investment standpoint. Looking at the long run, I would also be concerned with the potential impacts of climate change on the ski season. The area where I grew up, when I was a kid, the ski season was significantly longer than it is now. But that was on the east coast. Could the same thing happen in the Rockies? I'd have to lean on the climate scientists for that answer.