Couple Hopes Their Trade Up To a Ski Condo Will Pay Off

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Couple Hopes Their Trade Up
To a Ski Condo Will Pay Off

By Jane Hodges

The investors: Alan Horowitz, 57, is a free-lance technology writer, and his wife, Vickie, 49, is an executive assistant. They live in Salt Lake City, Utah, and have been investing in real estate for about four years. The Horowitzes currently have three investment properties, with a fourth in the works.

The property: The Horowitzes bought a 600-square-foot ski condo in Park City, Utah, in January 2002. The property is their second in Park City,which is about 45 minutes away from their hometown. The one-bedroom, one-bath unit was in good condition at the time of purchase and has a small balcony and a fireplace. While not a "ski-in, ski-out" home directly on the slopes, the condo is within walking distance to ski lifts.

The interior of the Horowitzes's condo in Park City, Utah.

Purchase price: $100,000. The Horowitzes used a 1031 tax exchange to buy the residence. They sold a Florida property and traded up to the Park City home, which they own outright. Mr. Horowitz says they were fortunate in purchasing the condo during a lull in the Park City real-estate market, which experienced a run-up in prices during the years leading up to the 2002 Winter Olympics.

Additional investment: They waited until the end of the 2002 ski season (which runs from December until mid April) before spending $5,000 on cosmetic renovations -- which included painting, and replacing bathroom fixtures, furniture, curtains and doors. Since then, they've spent about $4,000 in additional fixes and upgrades.

The strategy: The couple rents out the condo and hopes to resell it at a higher price at a later date. Property owners who bought in Park City when they did tend to bank more on real-estate appreciation than rental income to make money, Mr. Horowitz says. Ski season income can be hard to predict, varying on snowfall and vacationers' habits, he explains. The couple uses a management company to handle rentals during the ski season, the condo's peak renting period, but rent out the unit without the aid of a management company the rest of the year to cut back on costs. (The company retains 50% of the revenue in exchange for marketing, booking and cleaning the unit.)

The pitfalls: Mr. Horowitz says he and his wife generally are pleased with their investment. However, they've had some difficulty determining the best way to profit from the rental. This past ski season, they leased their home to a long-term renter for an amount that was less than what their management company might have earned them with short-term tenants. Other years, they made higher rent during ski season, but struggled to find off-season renters.

The payoff: They estimate their paper profits to be $134,400, excluding capital gains. The condo was appraised for $220,000 in November. This is how they arrived at their figure: $220,000 minus the purchase price ($100,000), plus four years of rent income ($14,400 -- after deducting property taxes and costs for the management company, homeowners' association, renovations, insurance and maintenance).

Do you think this was a good investment? Share your thoughts on this property.

-- Ms. Hodges is a free-lance writer in Seattle.

Email your comments to rjeditor@dowjones.com.

-- December 15, 2005