Uber Ritzy Ski Resort Town Strategies?

Question

I live in Big Sky, Montana and I need an outsiders perspective on making the numbers work on buying real estate in my market.  I know there is a way, there is always a way to make the numbers work.  However, with the average SF home here priced at $1million what does one do?  House-hacking doesn’t cover the numbers, short-term might get close but it is pretty risky and seasonal here.  There is not much for BRRRR opportunity as Big Sky wasn’t even a place on the map before 1970.  Literally there wasn’t even a town here then.

Right now developers are blitzed, over 500 concrete trucks a day come into town and one of the private clubs here poured over 100 residential foundations last summer.  In 2015 the town estimated Big Sky as a place was only about 40% built out and by 2025 it would be nearly 100% built on the tiny amount of developable land here in the shadow of Lone Peak and nestled amongst National Forests and Yellowstone National Park to the South.

Do I just buy a lot and sit on it?  Do I build?  I don’t have the income to not have a property cash flow within a few months of purchase...

Thoughts?

Alan Brown · Answer

Yep, @Corey Meyer, and @Nathan G., you nailed it.  Seems extremely rare to find anything that will cash flow in BZN let alone Big sky!  A pretty amazing market for those that have the luxury to not cash flow....

what’s the cheapest piece of land you can find there, do you suppose?

And I think I’ve heard that ahort term rentals in BS are tightly regulated, no?  At one point I was thinking if I could just get ahold of a condo that would just break even for a few years I’d go for that.  Probably not, right?

It’s really my favorite place on earth geographically, but apparently I’m not alone!!

Corey Meyer · Answer

@Nathan G.

This is a very helpful response Nathan.  It brings clarity to me, I believe the podcast episodes I have been listening to really hammer into me the importance of cash flow over appreciation but I just couldn’t find it in my market.

Now that I think of it I had a friend whose mother bought a lot for $800k ski/in-ski/out to build on and before she broke ground she got an offer for triple the price she paid within one year of her purchase.

Corey Meyer · Answer

@Alan Brown

It is hard to beat geographically, agreed!  You are not alone in liking its appeal!  Big Sky is a boom town.

In terms of short-term rental regulations Big Sky is completely unregulated at the moment.  Since our town is unincorporated we don’t have any city laws against short term rentals.  The only thing stopping one is an individual HOA of a Condo’s Association.

I was at the right place at the right time and began short-term renting my condo in 2014.  This year it will gross just under $50k versus my first year at around $22k gross.  My mortgage is just under $1k/month for the one bedroom one bathroom unit.  www.bigskybungalow.com

<... manage short-term rentals

The problem I have is that I don’t have the luxury to not have cash flow,  I need something that will at least come close to covering the mortgage!

Cheers-

Nathan Gesner · Answer

In a growing market like that, appreciation is where you'll make your money. Purchase prices are so high that it's very, very difficult to find a property that will cash flow. It's possible, but you have to work hard, be patient, and jump on them quickly.

In my experience, markets that cash flow usually have poor appreciation. Markets with strong appreciation usually have poor cash flow. Your market may be best suited for flipping, new construction, commercial, or buying in the path of progress.