Author Topic: Talk me out this(car, house)  (Read 2856 times)

Jakerado

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Talk me out this(car, house)
« on: February 04, 2016, 12:18:06 AM »
First, the background:

I'm currently working in an area that is expensive (600k+ gets you a studio or maybe a 1 bedroom), and renting there. My rent is ~2300/month, with a housemate taking that down by about half. My passion in winter is skiing, and my plan for after retirement is to retire to a mountain so I can spend all my time on the mountain. I typically spend 30-40 days in a year during the winter at a ski resort, and it costs ~200/night if I stayed overnight (I'd like to, but I haven't been able to justify the cost yet). I live about 180 miles/4 hours away (you probably know where I live and what area I'm talking about now ;), and I currently take a bus to the area at 55/day (astute readers will notice that means I spend 16 hours on a bus every weekend during the winter). I have a further cost of ~1200/year in season passes. Typically my family will visit 1x - 2x / year. Each time they visit means ~2k in hotel costs.

My thought, and one I'm not sure is a good idea, is to buy a condo or house in the area and rent it out while I'm not using it. I have some experience running rentals already, but only when I'm within easy driving distance of the place or living in it.

Purchasing a house in the area (3 bedroom): ~600k, rental income from that if it's a long term rental ~2100/month, but then I wouldn't be able to use it.

Purchasing a condo: ~350k. Vacation rental prices ~100-200/night.

However, if I did that I'd also need to buy a car, which would add another ~11k one time fee. But if I had a car I could rideshare trips from my area up (~$20-30/person) to cover gas.

My goal with this would be to have an asset that's pretty close to break even to avoid the cost of a hotel and cover the car I'd have to buy to drive myself up there. I'd also prefer to spend 8 hours per weekend commuting, instead of 16. Once I retire, I'd plan to move into the place, or depending on the rental income situation and housing costs when I retire, buy another place and have one home and one rental.

Or, to summarize:
Current spend: 1200/year + 2-4k/year + 1600/year = 4800 - 6800 / year

Potential spend:
400/year on a season pass (would be able to cut this because I'm not at the mercy of where the bus goes)
Mortgage on a 600k house or 350k condo ~3% interest (~2000/month, ~24k/year? on a 30 year) + 1 time 20% down.

Car: 1 time fee, Insurance: No idea, I haven't owned a car in 6+ years. Parking: 300/month pre tax.

Potential income: $200/night vacation rental (would buy a place that rents summer and winter) or ~2100/month long term rental. ~$20/day skiing from rideshare (or, ~$600/year)

Current return on investments: ~5%, was ~15% before the recent downturn.

Does this make any kind of sense? Am I crazy? Should I just live with the recurring hotel costs+extra commuting time every year until I retire?

Villanelle

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Re: Talk me out this(car, house)
« Reply #1 on: February 04, 2016, 01:10:17 AM »
You also need to figure in property taxes, HOA (if applicable) maintenance, property management fees (unless you will self-manage, which would seem impossible to do long distance if it is a vacation/shorter term rental), homeowner's insurance, and any other costs.  With all that, your $2000 is probably more like $3500, or more, perhaps by a lot.  There may be licenses or other costs for a short term rental. 

And are you sure that kind of place you could purchase for that house or condo would get you $200/night? 

It seems like you need to really dig in to the numbers, but it doesn't really sound like it would work. 

Have you considered finding a new job in the area, or at least closer? 

And for your weekend trips, have you looked at couch surfing or renting rooms on VRBO or AirBnB to see if you can do better than $200?  If you are hell bent on going up both weekend days, a room at $55 would break even, and save you a lot of headache and time. 

Also, have you considered buying a car to add to your current situation?  A cheap car (>$5000) will have cheap insurance.  It wouldn't be long before you covered your annual bus fare (about $2000), even with gas money.  If you could find somewhere cheap to park it, since you don't need it as a daily driver, those numbers might work out. Far be it from me to suggest, on MMM, that someone should buy a car, but if you are going to travel 180 miles one way every weekend, it might make sense.  You could also sleep in your car, giving you a free hotel and saving you the pain and cost of doing the trip twice a weekend, instead of once. 

ooeei

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Re: Talk me out this(car, house)
« Reply #2 on: February 04, 2016, 06:53:13 AM »
Just keep in mind a vacation rental, especially in a ski town, is going to require much more maintenance and upkeep than a single family home you have tenants in annual leases on.  Those costs will not be negligible, and should be researched as much as possible.  Personally I'd never want to spend $600k on a house then rent it out to ski vacationers who often come from warmer climates (which means they love having fires in cold weather because they never get to at home) and are often partying pretty hard.

The semi-obvious choice here is to move closer.  If you can find a job sort of nearby for $5k less than you make right now, everything evens out. 

junglejim83

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Re: Talk me out this(car, house)
« Reply #3 on: February 04, 2016, 07:19:09 AM »
Jakerado,

Based on the numbers my guess would be you live in the Bay Area, if not my ideas below can probably be applied elsewhere (west of Denver).  If you are on the East coast, option one below would be the most realistic.  Is it imperative that you have a place that guests can crash at and entertain or are are you averse to camping or sleeping in a car/van? If I am wrong on the Bay Area, I imagine you can find similar alternatives if you do a little digging, so think of my ideas generally too.

I lived in SF for a while and would do the drive to Tahoe every other weekend.  One thing to think about owning in the mountains is that if you are near the resort there are probably going to be HOA fees involved and if there aren't you are going to have to worry about paying for plowing and related costs since you aren't there to take care of it yourself and will be skiing when you could be doing maintenance.  I had my season Pass at Kirkwood.  Talking to a guy on the lift, he bought his 1 BR condo across from the lift for about $100k 20 years ago.  I believe his mortgage was about $400 but his HOA and heating put him at nearly $1,100 a month.  Even if you don't have HOA fees, you gotta account for $30-$60 every time you get plowed out and heating (at 55-60 degrees when you aren't there). 

In terms of your in-city costs, is there a place you could park a little farther away to reduce your in city costs.  Maybe rent  the car (if you bought one) on Relay Rides during the week to cover costs.  If you park it at the airport and do Relay Rides you may not even have to pay for parking (i think the car has to have <100k or 75k miles for relay rides)...

Here are a few options I did or thought about:
1) Join a ski lease, even if through craigslist -  maybe $1500 to $3000 a season for a bed or room, but you are just paying for the season and will likely have people to ride back and forth with regularly.  The fuel can be expensive and driving that much (and your parking) so it would be nice to split that cost and maybe not have to buy a car. I would have considered this but I had a Kirkwood/Heavenly pass and my friends had Squaw Passes.  I wasn't gonna wait in lines and pay twice the amount for the pass. 
1A) Buy a place and rent it out as a ski lease/vacation rental and that could cover your costs... This could be a great option.  maybe you could even make money...  I could have considered a ski lease in South Lake but that didn't occur to me until I found a cheaper option...

2) Have you heard of the Sno-Parks?  They are managed parking areas every 10 miles or so around the Tahoe area in the national forest to provide back country access.  There is one 3 miles from kirkwood and if you can beat the storm there that you know might close the roads coming in you can get the whole resort to yourself...  There are also sno-parks on the way to South Lake and North Lake.  It is $5 a night to park and there are bathrooms.  I got a 0 degree down bag at the REI garage sale ($30), I would pitch my tent before sundown, 50-100 yards in out of site. Head back to the Kirkwood Inn for a giant bowl of chili, hydrate, fill my nalgene with hot water to put at my feet and go to sleep in my ski gear (maybe throwon a puffy coat to make sure I am cozy.) there are some more details which, if this is something that interest you, I can fill you in on if you like.  You should do research b/c you need to make sure you are prepared for winter camping, it can be dangerous if you are not set up properly.  But it can be awesome. 

I imagine this isn't just limited to the Sierra's either.  You can camp pretty much anywhere in the national forests (where most ski resorts are) as long as you can park legally.  If you get a car for this, you could do a ride share through one of the websites b/c people are always looking for rides to resort areas.  Also, I bet you could create/find a meetup group to do the winter camping or ski-lease with. There are all kinds of cool groups on meetup - some people can be 'different'  but there are also people who are looking for others that share their passion.

2B) If you buy a car, buy one you can sleep in.  A wagon or maybe a minivan (or pimp out cargo/mini van and make it a small camper)  and park at the sno-parks or walmart if you can stomach trading the wilderness for all night street lamps (A lot of resorts don't allow overnight parking).  But keep in mind fuel cost on the 360 mile round trip and spread that cost to other riders.   


If you decided to do the camping/car camping option, you can still get a hotel room on nights you are with friends or want a more civilized experience.  However, if that isn't your cup of tea, I think some mix of a ski-lease and rideshare could be the way to go, but there are the maintenance considerations ooeei mentioned, so being the leaser mitigates those concerns if it is not something you want to deal with However, if you approach a winter ski lease/rental property with an open mind you might be able to make money in that scenario and have creature comforts.  Enjoy the snow.

Jakerado

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Re: Talk me out this(car, house)
« Reply #4 on: February 04, 2016, 10:30:08 AM »
Unfortunately (fortunately?) I make too much to easily find another job that pays similarly. I'd be taking a 30-40k+/year hit if I moved to anywhere other than maybe NYC. There's a small possibility of remote work, but that kind of throws off my planned career trajectory. Assuming everything stays on track I'm looking at ~200k/year salary in under 5 years not counting investment returns and benefits.

I wasn't clear before, but ~600k is a single family home, 350-450k is a similar condo. I was guessing that the condo fees would bring the final monthly cost up to about the same as the house. I didn't take plowing and heating into account, though (I don't need heat or AC where I live now so it's easy to forget about). Property taxes are 1.25%. I'll look at short term rental licenses in the area I'd be buying, I didn't think of that since the renting I've done in the past has been long term tenants. I'd basically be looking for the house to pay for itself until I retire when I'd buy it anyway (in cash or financed depending on returns vs mortgage rates). I don't need to make a huge profit on it as long as it's break even, because I'll need a place to live no matter what, and that place will be at a ski resort.
EDIT:
That should have read break even with investing. I'm at 5% return now, so I'd want a minimum 5% return on the principal of the house, 100k house means 5k/year minimum (preferably 10k/year) in rental ignoring mortgage interest payments, including HOA/other fixed costs, for example. those numbers seem to work out, but they're close and hinge on how many days are vacant.

If anything 200/night is on the low side. I'd be looking at a 3 bedroom house, and Airbnb has 120ish as the cheapest for a 1 bed. 2beds are 200+. The resorts are 200-250/night for a 2 bed if you have a passholder discount. A cheap hotel is 100/night. You can go a bit cheaper on the hotel, but it doesn't get too close to 55/night.

Thanks for the suggestions on the camping thing. I hadn't thought of that so I'll look into it. My parking costs were estimated on parking in a garage near where I live. With how infrequently I drive I don't want to try to mess with street parking.

I was budgeting about 11k up front for a car based on a cursory craigslist search. I haven't owned a car in forever and I don't have the space to do any repairs on it myself (street parking only, mostly hills) so I'm bumping the price a bit to get a used car without many issues/certified etc with a warranty from a dealer. I also don't plan to keep the car in retirement. Public transit and walking everywhere for me.

I've looked at renting a car instead of buying and the problem with that is chains. I either need 4wd and snow tires or chains, and both are tough to have on a rental.
« Last Edit: February 04, 2016, 10:56:35 AM by Jakerado »

jjcamembert

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Re: Talk me out this(car, house)
« Reply #5 on: February 04, 2016, 02:21:02 PM »
When does the bus run? Could you take it up Friday and return Sunday? Can you work from "home"?

I am sharing a ski condo this year (6 mo rental, 6 people, $400/mo each) and while it does toss my FIRE date off a bit, that's what I would do if I FIRE anyway. The big expense I wasn't expecting was utilities which run about $250/mo! It's cold up there! We cover those though by charging a small guest fee if people want to bring friends.

I know some other people who rent rooms in the mountains off Craigslist, same as you would rent a room in any other city.

There are a lot of extra little fees in resort towns that would eat away at any profits. If there's an economic collapse I figure vacation properties would be the first to fail and maybe I can pick up a cheap foreclosure then. But until then it's much easier and cheaper for me to split a rental.

Jakerado

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Re: Talk me out this(car, house)
« Reply #6 on: February 04, 2016, 03:19:00 PM »
It's specifically a ski bus, so it runs early morning saturday and sunday. I can sometimes take it both days and stay overnight up there, but it costs the same 1 way as round trip, and I'm limited to staying at the resort, since I don't have a car in the area. Basically, they have to reserve the seat in advance, so if I'm taking it 1-way it takes a seat they could have sold for round-trip, so they charge full price whether it's round trip or not.

Here's my thinking re. owning the place: The price you've quoted (6months for 6 people at 400/month per person) means 14k/year rental income if I owned the place, which, given my current '5% return' thought puts me in the 200k-250k price range. If I could do a summer lease as well that'd put me solidly in the 10% return arena (or in the 400-500k price range).

I can sometimes work from home, but not regularly with my current job. If I got a job that would let me work remotely regularly I'd be looking at a salary hit of at least 30-40k/year because I'd be switching career tracks into one that pays less in general, and that track maxes out 30-40k below my current salary. (currently in management, I'd have to switch to an individual contributor role if I were to take a job that regularly allows remote work, and IC roles max out at a significantly lower salary unless I work at a huge company that wouldn't allow remote work)

Jakerado

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Re: Talk me out this(car, house)
« Reply #7 on: February 07, 2016, 10:08:39 AM »
Small update: found a (used) car I like at just over 11k with taxes fees and the rest. Bought from a dealer, but no warranty (2006 with just under 100k miles) Brief online quotes for insurance put me in the 40/mo range with liability only. I figure the car will cost me ~5-6k/year to own when I include parking, gas, and amortize it over 10 years, but it enables summer trips to national forests as well as winter ones to the mountain. It doesn't change my fire date, but it does mean I have less money to waste. And I'm still hoping I can defray some of the costs with ridesharing(not lyft, but real ridesharing) I haven't bought it yet though, giving myself a few days to think it over.

Any advice on what to do with the car during the summer months when I'm driving it far less? I don't want to ruin the car by letting it sit around for 4mo between uses...(or is that a myth?)

I also looked at a slightly different area for property, I'd have more competition from hotels, but sale prices are also quite a bit lower (~250-350 for cheap houses)

junglejim83

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Re: Talk me out this(car, house)
« Reply #8 on: February 12, 2016, 10:47:17 AM »
An update to my post earlier would the that Relay rides is now called Turo.   this could be an option for your down time in the with the car.  I believe you may not have to pay for parking in that scenario b/c they reserve spots at some airports.  With that said, I think there is a mileage limit on the cars they will accept so that may be a deal breaker at 100k mi, I don't know. 

 I am looking into it now for a car I own b/c has crap lease terms and it sits a lot.  basically you rent the car out to people through the website (think air bnb for cars)  there is a $1mm liability policy built into the service and they will cover any damage reported within 1 day of return. 

If renting the car out is not something you want to do,  look into what areas of your city have free parking and when the non-parking days are for when you should move it.  Or find out what I parking ticket costs.  It may just be cheaper to pay for a ticket once a week than for an actual parking spot.  If you live in SF for example, there is usually good fairly break-in-free parking available between lake and clement street in the inner Richmond right off the Presidio, which could make for a nice trail run once or twice a week to check on it.  The bus goes right there too.

What kind of car is it?  If not awd/4x4 make sure you get snow chains and try them out in advance.  Putting them on the first time in the snow is not fun and maybe have a cheap pair of work gloves to wear in the car at all times for when you need to put the chains on.