|
Q: I own a small condo in Mammoth and ultimately want to own
something larger and preferably a bit newer with laundry and maybe
even a garage. Is now a good time to make the change or should I
wait?
A: What you are talking about is commonly referred to as
"move-up" in the real estate industry. In a resort community like
Mammoth, it is common for people to move up, move down and move
around. Many owners of Mammoth real estate have been moving up in the
last couple of years, and for you, right now is a good time to
consider the kind of move you are contemplating. So let's look at
the dynamics of the market that make it so.
There are many specific segments of the Mammoth real estate
market that you could have invested your money in a few years ago and
realized very good appreciation. Counter to what many people (myself
included) would have predicted back then, one of the best places
would have been low-end condominiums. The prices were beaten down and
their revenue and cash flow would have become excellent because of
significant increases in local rents, and now their values are up for
a variety of reasons, including the impact of the cheap season ski
passes.
Meanwhile, while residential homes and lots have gone
out-of-sight, one segment of the market that still has good buys is
townhome market-specifically many of the early 80's built townhomes
that are in nice projects with attractive locations, were well built,
have good floorplans and storage, most have laundry facilities, and
most of the homeowner's associations are in good shape.
This segment of the market saw some good appreciation in the
late 90's but hasn't done much since. One of the reasons is because
there is a good supply of these types of properties around town. Many
of those projects were built in a boom era in Mammoth. But the
pressure on that segment of the market is bound to change, and maybe
soon.
The reasons? First, the "baby boom" pressure that we've
talked about so much the past decade is really starting to show.
Those buyers want a quality property with many of the characteristics
you have described and desire. They want a place they can entertain
family and friends. They want a "quality of life" property. But many
of them have now been priced out of the single family market-a change
that has only occurred in the past 12 months. And this type of buyer
isn't really interested in a "condo-hotel" unit like the ones being
built in the Village.
Another glaring reason this segment should start seeing more
action is that many of the lower-end condos are starting to approach
the prices in this segment. Today, if you compare what $200,000 buys
you in the condo market to what $300,000 buys you, the difference is
significant. Based on my observations, that discrepancy should
disappear sometime this summer or fall. So in your case now is
probably an opportune time to make the move.
One of the critical things to assess in any real estate move
are the tax ramifications. The standard answer from any real estate
agent is to discuss this with your CPA and other advisors. But the
tax code is in your favor on this move. The tax-deferred exchanged or
"1031" (after IRS Code Section #1031) exchange is a very common move
in and out of this community by buyers and sellers. You've owned the
property for awhile and you are moving up in price, so you should be
in good shape. Just make sure that the exchange is implemented in the
escrow and understand that once you close the first condo that there
are "clocks ticking" for you to identify and close escrow on the
next one.
So for now everything appears to be in your favor. Lots of
Mammoth property owners are taking advantage of their appreciated
equity and doing things to improve their lives and investments. There
are some great options and sometimes the hardest part is deciding
what to do and when to do it. But as we say around our office, those
are quality problems.
|
