Get the details over on SecondShelters.com.
Get the details over on SecondShelters.com.
Discovery Land Company was in town last Tuesday night for a beautiful presentation at The Dallas Petroleum Club. If you compare developers to handbags, Discovery is the Birken Bag with a Louis Vuitton wallet inside. Discovery developed Vaquero and a number of uber high end communities from Texas to Arizona, and has the kind of sterling reputation most developers could only dream of. Discovery has developed a host of world class golf, ski, and residential first and second home communities across the globe. Last week, they were selling Texans the creme de la creme of whole ownership vacation home living, the Yellowstone Club in Montana.
Never heard of The Yellowstone Club? If you are in real estate, shame on you. Go pour a glass of wine and pull up the chair.
First, News alert: Americans are starting to buy vacation properties. Plummeting prices, volatility in the stock and bond markets, and American love of home ownership is surging through: sales are up in Aspen and even in Miami. Sales in Miami were up 34.1 percent in September from the same month last year, according to the National Association of Realtors. Sales in other hard-hit areas also rose. Atlanta was up 24.7 — well, we sent them Al Hill III — and poor price plummeting Phoenix was up a whopping 25.3% percent in September.
I keep waiting for the day when homes are given away in Phoenix.
And I’ve been waiting a long time to hear this quote, I found it in the New York Times:
“There’s a certain confidence in parking their cash here right now, as opposed to leaving it in the stock market or whatever country they’re from,” said Allison Turk, of EWM Realtors. “Their hope is for a 2 or 3 percent return on the properties today that will grow to an 8 or 10 percent return in five to 10 years. Buyers believe that vacation homes in crucial markets are priced at the bottom, while investors from abroad see these areas as safe harbors that could drive up their returns. And so the real estate cycle begins again.”
South Texas is not a troubled area, and Port Aransas condo and beach home sales are brisk and moving. Didn’t surprise me at all that Discovery came to Dallas to showcase their second home communities.
The Yellowstone Club, west of Big Sky, Montana, is probably the most exclusive ski resort in the free world. It is the world’s only private ski and golf community in the world — yes, private ski slopes, 13,600 acres of Montana wilderness and powder, 864 exclusive residences with owners dripping prestige like Bill Gates (these are the slopes where the Gates kids learned to ski) Jack Kemp, Dan Quayle and more billionaires than any ski lift has ever held. The famous over-spending founders Tim and Edra Blixseth had caviar-laced New Years Eve dinners at The Club for $1000 a plate. One spec home called the River Runs Through It home even features, yes, an all-glass passageway to the guest quarters with a heated river flowing below it. Tim and Edra are now both extremely broke and divorced, she selling her $55 million Porcupine Creek ranch in Rancho Mirage, CA saddled with what some say is $1 billion in debt.
Here’s the thing about buying into a Club with a lot of rich people: they can afford to pick up the pieces. The owners financially rescued The Yellowstone Club, and it wants to get back on track as a great, luxurious family retreat in summer and winter for hard-working (read: high net worth) people. They hope to find some second home buyers in Dallas. Think I’ll have to go there this winter and check it out for you! I’ve already checked out Spanish Peaks, which I totally loved, but which I understand is now is struggling.
Other Discovery properties include Gozzer Ranch on a rocky bluff over looking gorgeous crystal clear and pure Lake Coeur D’Alene, Idaho: marina, top-rated golf course and much more, this development offers 258 estate homesites plus cabins, cottages and luxury water-front condos.
Baker’s Bay Golf & Ocean Club is a private club and community on Great Guana Cay in the Abaco Islands of the Bahama. There’s El Dorado, another beachfront community and golf club in Los Cabos, Mexico with more luxury homes, villas and casitas; Mountaintop, a private golf and residential community in the western North Carolina mountains. Then there’s The Madison Club in La Quinta, CA and Rock Creek Cattle Company, a working cattle or what I call “condo ranch”. These places might be sharpening pencils a little harder on pricing, but they are well-funded for the most part and weathering the storm. Course, that’s what I said about Spanish Peaks. Most buyers — families with young kids or baby boomers looking to provide a legacy home for the future, are circling for even a flat investment. I mean, the stock market is doing so well right now, right?
Funniest story I ever heard about the art of selling second homes came from one of the most honest salesman I’ve ever met — Jim Jackson down at The Palms on Costa Rica. Jim was interviewing salesmen and said to one, ok, give me your best pitch — what’s your closer?
“I ask the buyer if he knows how a child spells love,” said the salesman.
You do recall former NBA champ Michael Jordan.¬† Not only is he known as “the greatest basketball player of all times” but he is gaining a rap as the greatest home builder of all times! Jordan is completing a 28,000 square foot mansion in The Bears’ Club, Palm Beach County, Florida, near where Tiger Woods just completed his grand estate. The builder: Lavelle Builders out of Jupiter, Fla. Of course, Tiger’s estate is surrounded by water on three sides to,¬† perhaps, keep the paparazzi (among other things) at bay. Jordan’s mega-mansion, which is still under construction, is not even close to the water. But it now goes down as one of the largest, most expensive homes ever built in Florida that is not on the water, says real estate agent Jeff Lichtenstein of Christie’s Great Estates and Illustrated Properties. Lichtenstein knows of what he talks: he sells real estate in the Palm Beach area, which is notoriously filled with high net worth people who like to enjoy a second or third home here because here they have it all: a backyard marina for their yachts, sea, beach, and plenty of gorgeous Florida sunshine.
Oh yes, and I almost forgot: golf.
Though waning with the general population, the wealthy still love to tinker on the greens. Jeff’s father, Cary Lichenstein, was a golf rater for GolfWeek Magazine and has been playing since he could walk. In fact, he lives so close to Jordan — in Admiral’s Cove – the elder Lichenstein could lend a hammer or nail to the twenty million dollar project.
The Jordan home will have 11 bedrooms, sits on a three-parcel site right in the backyard of the uber exclusive (and hard to get into) Bear’s Club. Let me put it to you this way: it costs $350,000 just to call yourself a member of the club. The area is loaded with courses designed by Jack Nicklaus, but he personally plays at Bears Club — so basically this area is golf nirvana and the membership list is a regular Who’s Who…¬† stars, Fortune 400 execs, and the Nicklaus family.There are 55 residences ranging from $4 million on up to, well, probably Jordan’s home. When complete, Jordan’s mansion will be a contemporary with Spanish-style roof — this I have to see. It will have four separate structures: A main house, a guardhouse, a guesthouse and a poolhouse for the mammoth swimming pool. In other words, the largest spread in the ‘hood.
Neighbors once included chanteuse Celine Dion, who ran into a few problems with her HOA over her desire to add a commercial recording studio or music room to her property — deeds are so tough in this ‘hood that even if a home burns down, you have to re-build it to look just like the original home. I mean, can you imagine the disaster if a Mediterranean went up right next to — another Mediterranean?
Jordan paid $4.8 million for the land and is spending an estimated $7.6 million for the construction. The Lichtenstein boys estimate that the total booty will top $20 million, and they worry a bit about re-sale value:
“It would be interesting to see what the Jordan home resells for, being that its location, while great for MJ’s privacy, is not ideal for resale to the usual trophy-and-yacht buyer,”says Jeff.
Only his banker knows for sure!
A 14 year old boy — a child — was arrested by Mexican authorities for beheading and cutting the genitalia off several cartel victims on behalf of the drug cartels. And he was heading for the U.S., arrested while boarding a bus for Tijuana, en route to visiting his mother in San Diego.
News like this is what is hurting the heck out of Mexico’s tourism and second home real estate market.
1. Second home trends: Affluent Baby Boomers will retire later and downsize from their large McMansions for which utilities and taxes have become prohibitive, to smaller homes, maybe condos,¬† in the city and a second home — in the cheaper boonies, or in another city. Just last night a reader emailed me that his biggest dream is to own a second home condo in Quebec! Cripes, even Disney is getting into this market.
2. According to a study by E360 Global Research, 45% of current second home owners think now is a great time to buy a second home. Of those, Mexico has a strong pull for almost half — and this survey was done in August, 2010. The drug cartel crime in Mexico is isolated to certain areas, they believe.
3. Of the 54% who say now is not a good time to buy a second home, most say the next two years will be. E360 (who provided much of this information) expects big growth in the second home markets surrounding highly populated areas.
4. Most people want a second home as a vacation haven to de-stress. Most prefer a lake or ocean view, with a mountain view coming in second. North Carolina, for example, is one of the fastest-growing second home destinations.
5. What kinds of amenities are second home buyers looking for? Good question. To some extent, they want great medical facilities (resuscitate me!) and a spa. Golf and eco-green based living also does not turn them on. I’ve read that many want to re-live their college years, with classes and intellectual stimulation (and pot?) nearby. Boulder, Colorado is home to a lot of intelligent people and gaining a large second home population, for example.
6. Pricing sweet spot: $200,000 to $400,000 and pay cash, if possible. I mean, those 401Ks are doing so well, right?
7. Vacation and lifestyle are the reason 46% want to buy; another 41% want to buy for investment. Only 11% give a rat’s tooshie about retirement.
8. 49% of second home buyers want a single family home, and 60% just want a 2 bedroom, 2 bath floor plan.
9. 49% of second home purchasers will buy domestically, but a growing contingent is eying Mexico and¬† Central America — Costa Rica, Ecuador, Panama — as a low-cost of living second home and place to retire.
10. The second home won’t be too close to the first: 30% of buyers want to be 100 to 300 miles from their primary home; 40% want to be 500 to 1000 miles from the primary home; 11% are willing to be more than 1000 miles away from the primary home.
The Presidential, bi-partisian committee scrutinizing ways to cut our huge budget deficit brought on by the housing market collapse, Wall Street firms going under, and the biggest government bail out in the history of the world, may end the U.S. home mortgage¬† deduction. It could certainly end the mortgage interest deduction of second home properties.
Some say there is no way the government will mess with the sacrosanct home mortgage deduction. I say: it’s 2010 and anything is possible.
Currently, you can deduct mortgages up to $1,000,000. So Todd Gilliam got this a bit wrong:
“Tens of thousands of Dallas-area residents use the deduction to trim their tax bills, mostly higher-income homeowners and those with relatively big loans, along with roughly one in four taxpayers nationwide.”
The Alternative Minimum Tax also plays a role. And every taxpayer is entitled to deduct their home mortgage, whether they itemize or not.
What is likely to happen: a compromise. And one shot at the mortgage deduction — so get ready to not be able to deduct the mortgage on a second or investment home.
Kind of like an unplanned pregnancy, more folks these days are ending up with¬† two or more homes on their real estate hands, making a lot more of us second (or multiple!) home owners. Real estate market conditions have practically stranded homeowners in their homes, which is not the end of the world if you keep a job, pay the mortgage down, and enjoy it. But what if you are offered a job in another city and cannot take it because you cannot sell your home? Countless Dallas Realtors tell me of clients who want to move here, but cannot budge because their home won’t sell. Back in the boom days, companies would move employees and even buy up their homes — many turning a profit on the re-sale. But now, companies are no longer wanting to be within ten hundred feet of the real estate biz.
“Nationally, the economy has caused many to reconsider career mobility. An Atlas Corporate Relocation Survey found in 2009 that 56 percent of responding companies reported employees turning down a chance to move, mostly among large and mid-size firms.”
That’s all because of real estate. So what’s a job-seeker to do?
Let’s say you, like Dunwoody, Georgia resident Ziyen Ng, are offered a job promotion but cannot unload your condo. What do you do? Lease the sucker out. That’s right, thanks to a new website called CorporateHousingbyOwner.com, he will get someone to lease his house, a management company will watch over it, and Ng is free to pursue that other job.
Should Ng buy a home in the new community he’d relocating to, we hope he becomes a regular reader of SecondShelters.
Second home buyers are a lot younger than you might expect, and they are not all affluent. Where do they want to have second homes? The beach, like Florida,¬† which is no longer God’s waiting room but foreclosure central; Arizona, where it’s arid and there are so many foreclosed properties to choose from you can get dizzy shopping; the Colorado mountains, the rivers and ski ways of Montana, and North Carolina, a growing hotbed of second home coastal communities. Believe it or not, the bubble bursting in real estate has¬† made owning a second home a reality for many because pricing has been slashed and dashed. And people are buying.
According to the National Association of Realtors, meeting at this moment in New Orleans,¬† vacation home sales were up 7.9 percent (in 2009), to 553,000, from very low levels in 2008.
In 2005 and 2006, there were more than 1 million sales for vacation homes annually.
Second home owners are not all rich. The median age of vacation property buyers was 46 in 2009, according to the NAR. And while 39 percent of vacation-home buyers had household income over $100,000, the median overall was $87,200.
And this market is not hurting as much as first homes. According to the NAR, the median vacation home price increased by 12.7 percent in 2009 compared with 2008, which brought it to $169,000. That’s still well below the 2005 peak of $204,000, which is all the more reason why you want to buy now or in the very near future when prices could get even softer.
Half of vacation home sales are in the Sunbelt, because snow birds do crave sunshine.
Florida is like one giant Filene’s bargain basement. According to Florida Realtors, prices on existing condos are down by about 24 percent just in the last year, dropping to $81,600. Yet, sales of those price-chopper condo units are up over 22 percent for the same period, suggesting some savvy buyers see an opportunity when the prices decline.
Still, do your homework and check back with us here at SecondShelters for buying tips and pitfalls to avoid.
Go into any area with rock bottom prices with eyes wide open: can prices go any lower? Yes! What are the signs of instability? Are banks in the area still open? Are the shopping centers surrounding developments see-through empty? How many other foreclosures rub shoulders with the one you are eyeing? Is this the beginning of an onslaught of yet more foreclosures, or are they winding down? If there are HOA costs, the few buyers/owners will shoulder the burden of all the HOA dues. Once foreclosed upon, developers go bye-bye and run out on any fees. Then there’s the cost of insurance, which can be higher in hurricane-prone areas. And don’t think insurance rates on the Gulf coast won’t be going up after the BP oil spill, though BP had quite a clean-up tab. There’s property taxes, maintenance, and security to make sure no squatters move in when you are out.
To spread costs, consider sharing a home with another individual or family, the co-purchaser. It goes without saying to have a lawyer draft a written agreement, no matter how close you are. You should even do this with family members. Spell out how ongoing costs will be split, and deal with other potential sources of contention — breakdowns, water leaks, repairs and maintenance, as well as what happens if one of you wants out after a few years or worse — dies?
And you can always make numbers work by renting the vacation home out during part of the year will. But first, the IRS will have something to say about that: IRS Publication 527, “Residential Rental Property.” You will be entitled to visit your vacation property for a limited amount of time each year.¬† But then, like one man told me, if we are lucky enough to have jobs, we don’t get to vacation for more than a couple weeks a year. So why not rent out that home and generate some income?