COST OF OWNERSHIP
CASH FLOW AND ROI
Whether it’s a two-bedroom, two-bath starter condominium on the bus route for $500,000 or a ski village residence for $5,000,000, Breckenridge, Colorado real estate price points usually boil down to two essential financial elements: a specified down payment (typically 25-35%) and an annual “cost to carry” after possible short term rental income offsets. Sorry, there is no such thing as “breakeven” or “cash flow neutral” properties without large down payments.
In an attempt to illustrate the magnitude of these two financial variables, at differing price points in different geographic
locations, we offer the following category alternatives, in order to help buyers understand the differences of “price per square foot” relationships based upon proximity to the ski slopes and size of structure.
Please keep in mind, these are case studies and NOT necessarily available “for sale” properties. These best-of-breed examples are intended only as financial guidelines illustrating the effects of a maximum leverage purchase model in conjunction with short-term rental income offsets.
COST OF OWNERSHIP
EXAMPLE PROPERTIES
Properties Under $1,000,000
Properties Over $1,000,000
Although our examples are financial in nature, we can compare qualitative issues in an easy-to-use spreadsheet format. To our knowledge, Summit Property Brokerage is the only local luxury Breckenridge real estate company offering this unique approach towards the decision making process. So please give us a call for your own customized property report.
COST OF OWNERSHIP
EVALUATION PROCESS
A ‘smart’ real estate decision is based upon a thorough understanding of the marketplace and comprehensive financial analyses
SPB measures “value” in four ways:
- Price point as compared to the overall field.
- Price-per-square foot comparisons so as to equalize the dilemma of varying sizes.
- The annual/monthly “cost of carry” as measured by negative cash flow.
- Return on Weighted Cost of Capital to include down
payment, negative cash flow and remodeling.
Shopping and pricing property without some form of spreadsheet analysis is an almost impossible task; because not all equally priced properties are the same! Each and every home has its unique personality reflecting location, floor plan, square footage, cost of maintenance, property management and an ability to generate short term rental income. Net income is the great leveler to this varied and bumpy playing field, reflecting all of the property variables – good and bad – as represented by the market’s willingness to pay set prices for use during traditional tourist seasons.
Using these four indicators of value, properties which intuitively offer the best price point in relation to available inventory, have the lowest cost per square foot, suffer the least amount of negative cash flow and produce returns equal to or greater than the stock market, typically qualify as “best buy” recommendations.
To find properties that are worthy of consideration, our spreadsheet analyses converts an array of variables into a simple-to-use format, which easily identifies the serious contenders. For the purpose of determining true market value, properties that make the “short list” are then compared to past selling records.
If we have intrigued you with our unique approach towards the process, please give us a call. As the Breckenridge’s only vacation home investment advisory service we offer unbiased counsel and information designed to put you in control of the overall process at no additional cost or expense.
