Where’s George?

Is George real? I'm going to take this in another direction, lol.

#whoisgeorge

I'm still alive. In Nowhere doing a renovation on the place we bought last year. Renovation is straightforward - no fixers needed for a building permit.

Prices are up anywhere from 50% to 100% over 2019 prices, especially at the lower end of the market. Some owners are getting stupid greedy, like the guy who listed a mediocre place at 2.5X what he paid a year ago with no work being done. It has maybe 10 saves on Zillow. The lower end of single family and rentals are still on fire, and new ultra-contemporary is moving quickly. The middle of the market is suffering a glut of overpriced, older, unrenovated inventory, and seeing price chops or properties lingering.

Renewed another year in NYC at -7% vs last year. Seems the market is coming back in Manhattan luxury. Rentals are a lot better than I expected, as are townhouse sales. The new mayor might not be a total disaster. Low interest rates are helping. So NYC is doing far better than I expected, but Nowhere is doing far better than NYC.

Good to hear from you, George!

Any desire to take the money and run after the renovation in Nowhere, or are you in it for the long haul?

We shall see. We are taking a home from entry level into the mid market where sales are slow. But ours will be better renovated than any property on the market in the middle price brackets, and recently renovated properties are still getting too dollar. Contractors are still jammed but not quite as badly as the spring. We might also do short term rentals since that market is still on fire at every price point. Delta variant is helping - looks to be another very busy fall.

Very curious where you are with these 50% / 100% property value increases. I'm in Palm Beach county and the market is certainly hot, but we're not seeing that kind of increase in valuations. Let's say 2019 (precovid) pricing versus 2021 pricing.

Although it seems like the pace / frenzy has tempered a little bit. The market down here has been strong for the last 4 years as more and more people want to call South Florida home for a variety of reasons. Covid-19 shot the market with adrenaline.

I bought one home in Palm Beach County for $230,000 in 2012. I've done pretty significant renovation, including adding a master bedroom addition, pool, full renovation of the interior and extras like a whole house natural gas powered generator. Current market value is about $950k. This is a four bedroom, three bath about 2600 f2, non-gated, no HOA. I put about 300K into the renovations.

Like to use real listings and real life scenarios that I'm experiencing to support what I'm writing about.

But in all fairness I haven't really studied the market down here. I'll have to take a look at some pre-covid current resales, I am curious exactly where we're at. Although I did also read an article recently that Palm Beach is running out of mansions...

I was at Mitchell Gold in Miami yesterday shopping for a sofa with my wife. Definitely a lot of New Yorkers shopping for furniture! I just got back from New York a few days ago, I felt like I was shopping on Lafayette Street, with all the New York City folks chit-chatting.

Nada: regarding Florida heat, you've really got to pay attention to the heat index. That beautiful weather we just had in New York for a week, you'll never experience that in South Florida in July and August or September October. As discussed though, I love it!

George, Nice gains on your real estate. Are your kid/s attending UES private school keeping you in the city?

Just spoke to a friend who runs his own brokerage in Palm Beach County. Depending on what pocket you're talking about, up 15 to 30% since pre covid, beginning of 2020. He covers Northern Palm Beach County.

Not too shabby, but not near your numbers George.

Nationwide HPA is running almost 20% YOY, so if you're not up by that, you're trailing the national average. I know someone who recently toured properties in northern coastal (Atlantic) Fla, and they came back empty handed bc people wanted 2-3x the 2019 price for unrenovated properties in the $1m range. Maine is still strong. The intermountain west seems to be the strongest markets (or at least very strong) - think small places bordered by BLM land where just a bit of new demand can send prices soaring: Bozeman, Blaine County, Coure d'Alene, Tahoe, Telluride, Vail/Beav.

https://www.wsj.com/articles/bozeman-real-estate-market-news-11627568896

That makes sense in the places surrounded by BLM land as it is very difficult to get permission to build new houses. Have rental prices kept pace with property prices in these locations or you are getting 3 cap rate instead of 4?

I'm pretty familiar with Vail/beaver Creek, I ski out there every year. I came very close to buying a small one bedroom at the Bear gulch Ritz, was just too difficult to make the numbers work with the 50% cut that they take from the rent as a management fee.

I've recently looked at units there and prices are up but not exponentially.

Regarding Northern coastal Florida, are you referring to the St Augustine / Ponte Vedra area? These homes are currently priced at a million which represents two to three times their 2019 valuation?

I'm very familiar with Palm Beach gardens, Jupiter (where I recently sold an oceanfront condo), Juno Beach, North Palm Beach. These have been very desirable locations for quite some time, not only are a lot of businesses here, probably half the PGA tour players live in one of these towns. You have an endless amount of variety, from the various Frenchmen developments, the bears club, old Palm, admiral's cove as well as plenty of homes on the intercoastal and other waterways in non HOA communities.

Prices being up about 30%, sounds about right to me over the last year. I'm very surprised to hear that homes in the much less desirable Northern Atlantic area of Florida are going for 2 to 3 times 2019 prices.

Here's some information from a broker I know out in Vail:

https://www.vailhomesandcondos.com/vail-real-estate-market-reports/vail-valley-year-end-2020-market-report/?utm_campaign=january-2021-template-%28quick-send%29&utm_content=year-end-vail-valley-detailed-report&utm_medium=email&utm_source=activepipe

*bachelor gulch...

Buying condos in a building with a long-term management contract with a hotel operator is a sucker's bet - whether full ownership or time shares. Doesn't matter if it's the Ritz Bachelor Gulch, the St Regis or Carlyle in NYC, or some cheap motel time share in Dominical Republic. The operator will set their management fees such that the units will never appreciate materially in value, and the unit owners rarely have any ability to get rid of the operator.

The area my friends were looking was just south of the Fla/Ga line - like the first exit off I-95. They want the tax benefits of Fla without the long drive to the tri-county area.

Yeah I wish those condo hotels weren't such a suckers game. Owning a small one bedroom at a place like the Dominick would be perfect for me, if somehow the hotel income could cover my costs or at least come pretty close.

I know that line of thinking is delusional! In locations like Vail, due to the high demand and high cost for one or two bedroom rental, I thought somehow it could make sense. Quickly realized it didn't.

@Keith/George
Recently been seeing ads for these guys: https://www.pacaso.com

1/8 to 1/2 ownership so its in between a time share and a full second home ownership.
Seems to be the intersection of RE & SV/VC backed startup land.
Probably has many of the pitfalls of a condo & time share all wrapped up into one haha.

https://www.sonomanews.com/article/opinion/commentary-sonomas-not-buying-what-pacasos-selling/

We are holders of fractional interest in The Phillips Club and love it, but do not consider it a real estate holding. We house NYC guests there and it works well for us. I don't think it makes sense for anyone who does not need high end hotel for more than 30 nights per year at the given destination. I also don't think the concept works at all in seasonal destinations because everyone wants the same dates. The Phillips Club works for us because NYC is a year-round destination, and we value our ability to treat family members to accommodations when they are in NY. When viewed on pure consumption basis with high-end hotel as the substitute, it has worked for us. It also works nicely as trade option for ski condos. There is a service called "Third Home" that has added tremendous value to the niche product that is fractional home ownership.

P.S. - Bachelor Gulch owners post their units regularly on Third Home. https://exchange.thirdhome.com/properties/28124-avon-colorado-timbers-bachelor-gulch-2-bedroom
I also believe they did get rid of Ritz as the operator. We have a friend who owners there and if my memory serves me correctly, he said that property fully sold out and the unit owners voted out Ritz Carlton. Looks like it is now a "Timbers" property, whatever that means.

One final note on "trades/exchanges" - The Phillips Club only allows one week of exchange through use of the Annual Reservation, but it is a nice perk to get a week in Park City at a nice condo.

And on Bachelor Gulch property, our friend lives in Denver and said that the bulk of the owners there live within driving distance such that the property is year-round for them. We also had a friend who lived in SF and owned at Calistoga Ranch in Napa. He put us up there for a week and it was fabulous. He used Calistoga Ranch the way we use The Phillips Club, and he absolutely love it . . . until it burned down.

Interesting MCR, we don't always stay there, we usually mix it up. We unfortunately missed our ski vacation last year for obvious reasons. Because of the relative high rental rates and the pretty full occupancy I thought there was an opportunity to have the unit easily pay for itself. Only a couple of the floors are condos the rest of the facility is a proper Ritz-Carlton hotel. But the Ritz was handling rentals for unit owners. T
I was looking at a one bedroom that I had found listed for about $750k (2 years ago), relatively high monthlies.
I know the Ritz-Carlton is still there, perhaps somehow the condo owners separated themselves from the hotel?

Ultimately we came to the conclusion we don't want to own any real estate that won't pay for itself. We just don't have deep enough pockets, the upkeep etc would bog us down. We simply do the Airbnb route, that kind of optionality really works well for us at this stage in our life.

Keith - Definitely the right choice with your criteria - these things absolutely do not pay for themselves.

@MCR I could use a Phillips Club for some of my family ; )

We do feel like The Phillips Club pays for itself in goodwill and reciprocal gifts we get from those we put up there. Also enabled us to house our nephew for 4 weeks this summer during an internship - our coop does not allow unaccompanied houseguests (and I know I’m in the minority on this point, but I love that rule).

Some places still trading 20% below 2008 prices.
https://therealdeal.com/2021/08/07/alicia-keys-and-swizz-beatz-sell-phoenix-home-at-a-loss/

Gotta admit I'm surprised that Bachelor Gulch went from a Ritz to Timbers - didn't realize that. Timbers runs the time shares at the St Regis NY.

It looks like timbers has managed the condos at RC bachelor gulf for a while. I was unaware of that. It's one or two specific floors that are condos there, the rest is still the Ritz-Carlton. Regardless, management fees for these condos is excessive.

I just checked Zillow for its estimate on the little cottage just south of St Augustine that I sold in 2017 for $175,000. Zestimate is $330,000. Insane. I love that part of Florida. Vegetation and climate are more like Charleston and Savannah than Miami or Palm Beach, and Flagler Beach still has the old Florida feel.

is Phillips Club a timeshare?

St Augustine is a very unique City to Florida, also the oldest city in the United States. We love visiting especially around Christmas time when the weather's cooler and it's mandated that the whole town have Christmas lights up..

Speaking of suckers bets:

https://www.wsj.com/articles/luxury-hotel-branded-condos-entice-buyers-even-with-no-hotel-11628596801?mod=mhp

@Anton - Phillips Club is a fractional interest structure. Deeded real estate complete with taxes and maintenance; you own a condominium with 7 other parties. It is like the Pacaso concept Steve123 posted above. Phillips Club has an established resale market, but it is structured, as George points out above, such that interests never appreciate. Most resales are at loss to purchase price of about 10%. Again, the product makes no sense for anyone who does not “need” high end hotel in NYC for MANY nights a year for MANY years. We’ve had out interest since 2009 and love it, but I would never claim it as any sort of investment. I think second homes are money pits in general given my preference structure, so fractional
interest is just a more shallow money pit. :)

A very young Tom Hanks and Shelley Long. "The Money Pit"

I remember watching this with my mother-in-law and she was cracking up. Often referenced when we were having worked on on their brownstone.

https://youtu.be/ZO8svUiRDNE

https://www.lohud.com/story/news/local/westchester/2019/04/23/chappaqua-mansion-sold-bankruptcy-auction-may-18/3534803002/

https://therealdeal.com/tristate/2022/10/05/john-catsimatidis-buys-87-acre-westchester-estate-for-a-bargain/

Cats is paying $300k a year in tax on that thing. Do you really own when the tax is so huge? Or is it like a permanent ground lease?

When you get down to it, all real estate 'owners' really only have a ground lease, with the government as landowner. Pay your taxes and stay out of the way of public domain takings, and it's pretty easy to maintain the fiction of ownership.

Cats is paying 6% of the value as property tax. That's often what buildings pay on their ground lease.

He's getting NYC to subsidize his high priced Coney Island development with a ferry that will cost taxpayers $20 a ride for a $4 fare (and avoid the poors). Don't be surprised if he miraculously gets a big tax cut on this house.