* I am not an investment advisor. Please consult one before making any investment decisions.

You wouldn't be the first person to dream of investing in a mountain home. But how do you decide whether you're looking at a good investment vs a luxury purchase. 

Investments vs Luxury Purchase

The lines can be blurred and can even have significant overlap. Even without renting your mountain property many owners make money on the eventual sale of the asset. In fact, according to data from the Summit association of Realtors, the median price per square foot has risen 63% in just 5 years from July 2016 to July 2021. That's an average increase of 12% per year. Because of the gains in appreciation, about 40% of my buyers choose not to rent. So while it turned out to be a good investment, that doesn't help you cover the cost of owning the property. 

That's where I'm going to draw the line between a Mountain Investment Property and a Luxury Purchase

A true Mountain Investment will pay for itself out of the gate or at least begin to within the first few months of ownership. This is called a cash-flow positive property and there are still plenty of opportunities to find one in Summit County. 

The first step is to examine what the negative cash flows are going to be. The most common negative cash flow items will be: 

• Mortgage Payment
• HOA Dues (Homeowners Association)
• Utilities that are not provided by the HOA
• Property Taxes
• Rental Management Fees
• Repairs and Improvements

Next, you want to consider the positive cash flow items which will be either short-term rental revenue or long-term rental revenue. Because many buyers want to use the property for themselves we are typically looking at short-term rental revenue. I can always provide my clients with estimates of short or long term rental revenue. 

Now let's jump back to that pesky rental management fee I mentioned above. You only need a rental manager if you're going the short-term rental route but they do take a significant cut ranging from 30-50% of your total revenue. These fees are typically all inclusive of booking, cleaning, post rental inspection, lodging tax payments, bedding, emergency maintenance and more. Maybe you think you can do the booking yourself and you probably can; but do you want to answer a call at 2 AM to unclog a toilet? Me neither. 

Another point to consider is you need to navigate the local regulations regarding short-term rentals. If you don't you could face hefty fines. A good rental manager will help you get your rental license required by many towns and to make sure you are paying the applicable lodging taxes. The town of Breckenridge even requires you to have a local contact who can physically be at the property within one hour. 

The long-term rental routes also offer excellent revenue and don't require the rental management fee. For long-term rentals you're probably going to be looking at a starting revenue around $1000/month per bedroom for an older, lower priced property. Some high-end one-bedroom properties can fetch as much as $2,000/month if they are in a good area. If you're looking for personal use of your property strictly in the Summer or Winter, a 6-month lease can be a great revenue generator while you're not here.

So what's the difference between property managers?

There are more short-term property managers than I can count here in Summit County, many of whom have great reputations. The property manager I would recommend would vary based on the location of your Mountain Home. For example, at Copper Mountain they have a management company that is owned and operated by the resort. While the resorts management company may charge a higher percentage, they also have higher revenue because they get last minute bookings at the front desks around the resort. The properties they manage are also front and center on the ski area website for out of state vacationers planning their ski vacation. Vail resorts produces similar results with their in house management at Keystone or Breckenridge.

Another difference would be the services they offer. Vacasa for example has made tech a major factor in their business model. Expect an easy cell phone app to manage your personal use, view your revenue and more. 

When choosing a rental manager I would always recommend interviewing at least three companies and also comparing their revenue projections. The vast majority of properties allow you to use any manager you would like but every once in a while an HOA does require you to use one specific management company. 

Get to the point Tucker, how can I buy a property to make me money?

The simplest answer is you need a significant down payment. I have ran countless properties through my spreadsheets and I find that 20-40% of the purchase price will typically reduce your mortgage payment enough that rental revenue will cover all of your expenses and put a few dollars in your pocket each month. Each property is different so please reach out to me and I can provide the revenue estimates and run the costs through my aforementioned spreadsheet.

Take for example this recently sold listing at 364 Salt Lick Circle, listed at $309,000. View Listing

Assuming the rental revenue estimates were accurate, this property would net you a positive of $234.15 per month. That doesn't even factor in the appreciation you'll get over time. 

What properties provide the best bang for the buck? 

Another difficult question because prices and rental revenue are constantly changing. But typically properties with a higher guest count will be your best bet. When you're visiting homes with me, I will constantly point out when there's a great wall for a murphy bed or why you should add bunk beds. Also, a one-bedroom condominium that also has a loft will probably be less expensive than a true two-bedroom unit but it can sleep the same number of people. I've even personally stayed at a property that had a single bed under the stairs!

The best performing short-term rentals I've seen are single-family homes with a high bedroom count, close to the ski areas. These homes are more expensive but I've seen some with rental history in the $180,000/year range. These large properties attract wealthier groups that all want to be under one roof. Think of a family reunion sponsored by the grandparents or an annual gathering of high-school friends. 

Take a look at 310 Whispering Pines Circle, which has a rental revenue of $218,000/year based on the projection by Mountain Management Breckenridge. Mountain Management Breckenridge is projecting net cash flow of $134,053 after management fees, cleaning, snow plowing, and utilities. 

What can go wrong? 

Investing in real estate is just like any other investment. Even blue chip stocks like Apple don't always go up or pay the dividend you expected. However, our mountain atmosphere does draw a reliable flow of vacationers and has increasingly year round visitors. Make sure that you can cover the holding costs of your property if revenues suddenly fall flat. You should always consult a CPA, investment planner and a real estate attorney before making a real estate investment. 

You also need to consider how your personal use will affect your revenue stream. If you plan on spending Christmas and New Years every year at your mountain home, that is going to take a big chunk out of your rental revenue. 

The market will also go through cycles where your resale value will not be at or above the price you paid. If it's time to make a life change and sell at a loss that's fine. If you can't swallow the loss, you should always be prepared to hold the property another several years until the market is on the upside again. 

Finally, local, state, & federal legislation can significantly impact your resale plans. Some towns have started to restrict short-term rental licenses. The state of Colorado has considered taxing short-term rentals the same as commercial businesses. The federal government is considering raising the capital gains taxes. All of these would significantly impact your investment. Make sure you're prepared if these changes take effect, stay up to date on these political topics and write letters to your representatives in opposition. 

Let's get started!

Email or call me today to discuss what you're looking for in your mountain investment. We can discuss your down payment and I can find a list of properties available today based on that. If you have more personal use in mind, let me know what areas you are interested in and what criteria you need. If you just want to browse or dream, feel free to use the search on this page for the most up to date listings. My search will prompt you to submit your contact information but when I reach out, feel free to tell me to buzz off and I promise to leave you alone until you're ready to get serious. 

I look forward to helping you find your mountain home!

Hello Commissioners,

My name is Tucker Zimmerman. I am a Realtor with Coldwell Banker Mountain Properties, a homeowner in Dillon, and a primary resident. I do not own or manage any short-term rentals.

I am writing to you based on your proposals for changes concerning STR permits/licenses. I am primarily concerned with three issues; Infringement of Property Rights, Government Picking Winners and Losers, and your motives.

Regardless of if a homeowner chooses to short-term rent or not, they purchased their property knowing it was an option. That option includes the future rentability of the property. This could be at the time of resale or just because of a life change. By taking away the owners property rights, you are diminishing the value of their asset. It’s cut and dry, you are taking money out of people’s pocket. Is Robinhood the thief really a good guy?

My second concern is even worse. In the words of Timothy Carney of the American Enterprise Unit “every time the government picks a winner, it creates another loser.” Your preliminary plan designates neighborhood zones where you will either heavily restrict or outright ban STR’s. This is an outright example of the government picking winners and losers. For example, let’s consider two properties that sold for similar prices in Keystone and Dillon Valley. Both Buyers bought their properties under the same county rules, knowing short-term rentals were an option. Now, you are going to heavily restrict STR’s in Dillon Valley but not Keystone. Therefore, you will kill any appreciation for the Dillon Valley property but the Keystone property will continue to appreciate. What gives you that right?

The noble goal of increasing affordable housing is at the center of all of this so my third point may come across as an accusation, but I don’t intend it that way. Instead, I think you’ve been played by two major corporations. Many of the properties maintaining their property rights under your proposed plan and under the recent Town of Breckenridge Plan are heavily staked by Vail Resorts or Powdr Corp. Both companies stand to benefit by having a semi monopoly on short-term rentals. Vail & Powdr both hold significant management stakes in the real estate you have deemed exempt. In fact, I don’t think a STR restriction has been placed on any real estate that would affect either company. However, they also stand to benefit from increased availability of workforce housing. Keep in mind that much of the labor for these companies is not the true local we’re trying to support. Both Vail and Powdr hire many J-1 and H-2B visa applicant, they even host job fairs in other countries. I’m all for a free market workforce, but I don’t think Summit County Government should harm our homeowners to supply cheap housing for Billion dollar corporations. To avoid any appearance of impropriety, Vail & Powdr corp employees should not be eligible for any deed restricted housing or the new Lease to Locals program. Those companies can build their own employee housing, I will be happy to help them find some land. If you prioritize Vail & Powdr’s bottom line, that’s where it becomes Crony Capitalism.

Thank you for considering these points. I urge you not to restrict any aspect of property rights but if you feel you must, please do not play favorites.

Update on Summit County Short Term Rental Moratorium from Summit Association of Realtors Executive Director. For updates on Breckenridge Short Term Rental Restriction Please see my prior blog post or inquire to me. 

-Tucker Zimmerman

Here’s an update on the County’s emergency short-term rental license moratorium proposal:

1. The emergency moratorium would disallow any new short-term rental licenses for twelve weeks, effective Tuesday, September 14^th.
2. The moratorium applies to unincorporated Summit County, but the County has exempted Keystone and Copper Mountain because these areas are designed for STR’s as tourism areas. Breckenridge, Blue River, Frisco, Dillon, and Silverthorne do not fall within the County’s jurisdiction, so this does not apply to them.
3. The moratorium intends to allow an overwhelmed staff to get caught up in processing nearly 75 applications for licenses per week, almost 1000 since January.
4. At the same time, the County is working on multi-faceted incentives and housing programs to help address housing issues that they hope to roll out by mid-October. This includes cash incentives to owners in areas such as Dillon Valley and Wildernest that they believe should serve as locals housing, to convert from STR to long-term rentals. It also includes allowing accessory dwelling units in areas where they aren’t currently allowed or incentivizing ADU’s to become long-term rentals with deed restrictions. These are just a few of their ideas.

SAR has asked that the County consider allowing properties already under contract the ability to apply for a license during the moratorium. We have also asked that spec homes/new developments under construction be allowed to apply for licenses. Finally, we have requested that properties that have STR reservations/rental contracts through the winter months be allowed to honor those contracts. We have asked the same to the Town of Breckenridge.

To learn more, sign up to come to SAR’s Pizza & Politics on Friday, September 10^th, from 11:30 am-1:30 pm to hear from County Commissioners Tamara Pogue and Josh Blanchard. We encourage you to bring your words of opposition or support, and ideas for them to consider.  Free Pizza lunch at SAR.

If you have any questions or comments, please feel free to reach out to the County Commissioners directly or to the SAR Board of Directors, Brian Bernardoni, our Government Affairs/Public Policy Director, or myself.

Breckenridge to Cap Nightly Rentals

Update from Summit Association of Realtors-Executive Director Sarah Thorsteinson

As expected, last night, after listening to an additional 3 hours of public comment, the Breckenridge Town Council passed a cap on new short-term rental licenses for non-exempt units at a maximum of 2200 licenses. There are roughly 3,0000 non-exempt licenses right now. Permits will be reduced through attrition, meaning as properties are sold, or licenses are turned in, the permit level will be reduced.  Once the 2200 level is achieved in several years, the Town will issue licenses based on a waiting list.  Attached is the ordinance and staff memo. The ordinance goes into effect November 2^nd, 2021. Current property owners may apply for licenses up until November 2^nd. Properties under contract must have been under contract at 11:59 pm September 27^th to obtain a permit.

Here are the details directly from the staff memo:

1. Sets a cap of 2,200 non-exempt STR licenses at any time 
2. Provide for a 6-month temporary STR license to the purchaser of an STR licensed property 
3. Requires that exempt properties have an on-site 24 hour staffed front desk 
4. The person responsible for staffing the front desk cannot be a member of the security 
personnel 
5. Provides for the administration of a waitlist of applicants for STR licenses when the non-
exempt license population exists above the 2,200 limit 
6. Added provisions for exchanges of property that allow the purchaser/grantee of a licensed property to obtain an STR license (‘exempt’ transfer categories) 
3. The amount of time a wait list member has to apply for a license after being notified that they are eligible has been reduced from 20 to 5 days 
4. Units for which a building permit was issued and in effect on September 14, 2021 may apply for a license within 20 days of receiving a certificate of occupancy (CO). 
5. Transfers pursuant to a valid real estate contract that was fully signed prior to September 28, 2021 provided the sale is completed within six (6) months of the signing of the contract.

Frisco is revisiting the development of the Lake Hill workforce housing subdivision. https://www.summitdaily.com/news/local/after-2-decades-summit-county-officials-still-finalizing-early-plans-for-lake-hill-development/

Take a look at the letter I just wrote to Frisco and Summit County Officials. Let me know if you have any questions regarding deed restricted housing or any comments on this topic. I'd love to hear your side of this story!

Dear Frisco Town Council, Summit County Commissioners and Summit Housing Authority, 

I am writing you today in response to the renewed interest in the Lake Hill affordable workforce housing project, and regarding the current and future structure of all deed restricted property in Summit County. My name is Tucker Zimmerman, and for the last 4+ years I have been a Realtor with Coldwell Banker Mountain Properties in Frisco. I was a resident of Frisco for my first three years in Summit County and am now a homeowner in the town of Dillon. Prior to relocating to Summit County I was a Realtor with Grand County’s most successful real estate team where I was heavily involved in the development of the Lakota Duplex neighborhood, and the evaluation of several other prospective developments. I am an alumni of the University of Colorado Boulder, with a degree in Corporate Finance and a Certificate in Real Estate. 

It is exciting to hear about the possibility of such a large workforce housing development coming to fruition. With the proposed 436 units, this project has the potential to make a significant difference in our affordable housing crisis for locals. In fact, with the limited land available for development, this may be one of Summit County’s last opportunities to make a significant dent in the problem. That is why I’m writing, to express my concern with how deed restrictions have been structured in the past and to offer areas where I think they could be improved. 

My underlying concern is that current deed restrictions undercut the reasons to own a home for the noble pursuit of supplying homes at an attainable price. These do not have to be independent, especially with the resources Summit County and its towns have been willing to supply. According to a 2016 Harvard Study,1 “Homeownership continues to be associated with significant gains in household wealth at the median for families of all races/ethnicities and income levels.” This gain in wealth is due to three major factors:  equity building through mortgage principal reduction, equity building through value appreciation, and the long-term potential to live in a mortgage free home. Of these, deed restrictions cut out the strongest wealth builder which is gain of equity due to value appreciation. I believe as Summit County officials you should evaluate whether the goal of workforce housing is to:  A) Continue your current path of supplying housing in a way that leaves owners unable to move into market rate housing, or B) Help our residents engage in and take advantage of our county's valuable real estate market. If you choose option A, the county and towns will fund countless housing projects and will eventually run out of land without ever solving the problem. 

The primary problem lies with the 3% per year appreciation cap tied to most affordable housing projects. Let’s take the Peak One neighborhood as an example. The Peak One Neighborhood limits appreciation to the lesser of 3% per year or the percentage increase in AMI (Area Median Income). At the time of development, according to the Peak One Neighborhood website, mortgage interest rates were around 5%. As an example, I looked at (Address removed for owners privacy). The owner purchased this three-bedroom, two-bathroom home for $294,900 on 10/21/2011. Assuming I used the same calculation method as SCHA, today the maximum resale price (ignoring approved capital improvements and real estate commission) for this home would be $393,970. That is a total increase in value of only 33% since October of 2011, while the average Frisco three-bedroom home price has risen about 114% since just January 2013 (January 2013 is as far back as Summit Association of Realtors provides data for). Not only did this owner’s appreciation not keep up with Frisco as a whole, but in 2011 there were five market rate three-bedroom homes priced below $300,000. One of those five homes (Address removed for owners privacy) just closed on June, 9, 2021 for $710,000, a 141% gain.

Now let’s go back to that mortgage interest rate of 5% I mentioned above. Assuming the owner of (Address removed for owners privacy) borrowed 80% of the purchase price, this Frisco resident has now paid about $148,176 in mortgage payments and still owes a principal of $193,750, totaling $341,926. So if this owner sold today, they would only reap a net 17% gain or 1.7% per year which far underperforms the S&P 500. After reading this case study, ask yourself if you think the owners of (Address removed for owners privacy) can likely move out of deed restricted housing? Were the owners of (Address removed for owners privacy) well served by the the Town of Frisco, Summit Housing Authority and the developers of the Peak One neighborhood? On both counts I would respectfully argue the answer is no. Not only that, but the appreciation cap is just that “a cap” not a guarantee. My point? A homeowner in this situation can only lose. 

I didn’t start this letter with the intent to sabotage deed restricted housing; I want to improve upon it and allow Summit County residents to engage in our market, so I’ll move onto my suggestions for a better system. Deed restricted housing should not be a permanent solution but should be a leg up to lift our locals into the free market. Below I’ll outline some suggestions, and I’ll use some timelines and numbers as a baseline, but it is up to you to study what the appropriate values should be to better serve our community. 

Appreciation Caps: As clearly demonstrated above, we need to do away with appreciation caps. At a minimum, they need to be significantly increased. I would argue a minimum of 8% per year is necessary to give locals a chance to ever move out of deed restricted housing without a significant career change. For perspective, market rate housing in Frisco is up 14.9% from May 2020 to May 2021.

Transition to Market Housing: While it’s great to live in an area with year-round neighbors, Summit County should blend the locals' housing with the reality that we live in a second-home destination. My proposal would be that after five to ten years of ownership, a deed restricted home could be sold to a non-resident with a heavy transfer tax paid by the Buyer (~10%), or it could be sold to a qualifying resident with no transfer tax. This transfer tax would then go back into the funding pot to create new affordable projects. Perhaps a maximum number of homes per year could be transitioned into free-market homes. 

Creativity: The county should look at creative variances where appropriate, and only in the case of workforce housing. Two years ago, the town approved an unwanted gas station at the corner of Highway 9 and Lusher Court, next to the Baymont Hotel. We didn’t have a need for a new fuel station or convenience store but the developer found that was the most valuable use for that parcel. In retrospect, what if the town would have allowed a height variance to match the Baymont in exchange for a developer building an affordable housing condominium project? This was a location where no view corridor would have been affected and it’s in an even better location than the proposed Lake Hill subdivision. 

Funding: Summit County Government needs to create a system where affordable housing funds itself. With the scarcity of land, it’s going to be increasingly difficult to create new projects. Summit County is one of the most beautiful places in the world and we have an extremely high quality of life. Perhaps our government could look to attract new big businesses that would fund affordable housing for not only their employees but for our long term locals as well. In the past, big business has been something the county has avoided instead of embraced. 

Restrictions: Currently some deed restricted properties and loan programs carry the stipulation that the owner/resident not own other real estate. While the motive is pure, it is wrong to prevent people from participating in the free market. On a personal note, I am recently engaged and we would one day like to have a family. This, naturally, would require a larger home. It would be unfortunate if my ownership of a condominium in Dillon prohibited us from becoming a part of the Lake Hill community. 

While past workforce housing projects have been well intentioned, they have ultimately underperformed the county's needs and have failed the residents from a financial perspective. It’s time to take a fresh look at how these projects are structured. The Lake Hill development presents the perfect opportunity to do so. Let’s not create another housing trap for our locals. Let’s use this as an opportunity to springboard them into a better Summit County. 

Thank you,

Tucker Zimmerman

TZimmerman@CBMP.com

Resident of Dillon, Colorado

Realtor at Coldwell Banker Mountain Properties

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