Renting Out Your Home or Condo
Are you considering buying a home or condo in Park City or Deer Valley to use as an investment property to generate income? There are many things to consider; we explain them all below:
Many of our buyer clients ask us for more information about ownership costs in Park City and Deer Valley, such as property taxes and HOA dues, compared to what can be earned from renting their property nightly, weekly, vacation, or long-term rentals. Surprisingly, once you break down all the different costs associated with ownership—whether it’s a home or an amenity-rich condo—it usually balances out to be quite similar in the end. The same applies to rental potential, as some properties can generate slightly more income than others, but overall, they even out when you compare income to the purchase price. Higher-end luxury properties that are more amenity-rich and have higher HOA fees tend to generate about the same overall percentage of net income for the owner. In summary, they are more costly to own, but also generate more income.
Below, we explain this all in more detail. But first, for the average investment property owner, this should primarily be a fun thing to own; you're not going to get rich from it. If you have extra money and have always dreamed of owning a second home in Park City or a ski-in, ski-out condo in Deer Valley, then by all means, come on out and let's find the right fit for you. However, if you're leveraging yourself financially in hopes of generating significant income, this is not the best place to invest your money. Owning property in a vacation resort town like Park City and Deer Valley can be a smart investment if you approach it wisely and set realistic expectations.
Potential Rental Income on Your Investment Property in Park City
There are a few different business models for renting out your property in Park City. Most owners use a full-service property management/rental company, but recently, VRBO.com has provided an alternative.
A full-service company will manage your property and handle all rentals, making the process very simple and "hands-free' for you. They will advertise your property on their online networks and manage all bookings from start to finish. They collect security deposits, rental fees, and coordinate cleaning, check-ins, and more. These companies usually charge a split ranging from 65/35 to 50/50. While it might seem like a lot at first, keep in mind they do a lot of work for you too. Their goal is to book your property often, but since they have many properties to fill, they also need to be fair to all owners. Properties with more upgrades and remodeling often secure more bookings.
The other option is to use a service like VRBO.com. VRBO stands for "Vacation Rental By Owner," and you may have visited their website. For an annual fee, you can post your rental property online and handle the bookings yourself. This is clearly more hands-on for you. You'll still need a local property manager or at least a reliable cleaning crew to help with preparing the unit between guests and managing basic maintenance. With VRBO.com, you have full control over your pricing, and you can offer discounts when necessary to secure bookings, especially during the off-season. If you put in the effort, you can make a good income. VRBO.com lets you customize your property's online listing with descriptions, photos, maps, and more. The more appealing you make your property, the better your bookings will be. The better you follow up with inquiries, the more successful you'll be. If you're willing to do the extra work, you can gain more bookings and keep 100% of the revenue.
Today, a few hybrid companies manage all aspects of property management and are designed to work well with owners who want to generate bookings themselves through VRBO.com. Club Lespri in Park City is an example of these hybrid companies.
Cost of Ownership on Your Vacation or Investment Property in Park City
When deciding to purchase a second home, vacation condo, or investment property, you need to be comfortable with the ownership costs associated with the property. These include utilities, property taxes, property insurance, HOA fees, maintenance and upkeep costs, and potential future repair expenses. You might also need to hire a local property manager to help manage the property - see our Property Management page for contacts.
HOME VS CONDO? The cost of owning either a home or a condo usually turns out to be similar. Any home, townhome, or condo includes standard utilities plus typical upkeep, maintenance, and saving for future repairs and replacements (like replacing the roof, staining the siding, etc.). Whether you pay for these costs yourself or contribute as part of a condo HOA, the expenses are comparable. Similarly, for covering future property repairs—whether you save money on your own or contribute monthly as part of a reserve fund maintained by the owners—it’s the same.
HOA stands for "Home Owners Association." An HOA is managed by an "HOA Board," usually composed of about five other condo owners (your neighbors) who are elected by the owners (including you) to oversee the association's best interests. You can nominate yourself for a spot on the board or simply stay involved if you wish. The Board typically hires an outside Property Management company to help run the community’s budget and daily operations. Their fee is a small part of the overall dues. Essentially, when you look at HOA dues, all the funds are planned and assigned to necessary items. As a potential buyer, you will have the chance to review the budget before completing your purchase. So again, whether you buy a home or a condo, the maintenance costs are generally similar.
So, the question is, what is typically covered in your HOA dues?
HOA dues vary from one condo community to another, so comparing dues across communities isn't very accurate. You'll need to compare the costs and what is included for you. In the end, they all tend to be about the same. HOA dues can be paid monthly, quarterly, or annually. Most HOA dues cover all common area maintenance, taxes, insurance, and a portion set aside for the long-term reserve fund. Additionally, the dues often include utilities such as water, trash, sewer, and, sometimes, cable TV. As an individual owner, you usually pay for your own electricity, gas, and internet.
The hotel-style condos generally include all utilities, which raises their HOA dues because they cover more amenities. Luxury properties typically offer extras like a pool, hot tubs, steam rooms, locker rooms, concierge services, ski lockers, shuttle service, housekeeping, front lobbies, meeting rooms, and fitness centers. As a result, these communities also have higher HOA dues to fund these features. However, because of these additional amenities, these properties also tend to generate more rental income. Overall, it balances out. When you review each individual budget, you can see where the money is going. Again, these dues are set by a budget approved by the condo owners and the board. So, if you’re comparing dues from one community to another, you’re missing the bigger picture.
What Can I Expect for Profit on My Investment Property in Park City?
What you can typically expect is that your rental income, when managed by a full-service rental company, will cover all HOA dues, property taxes, insurance, and utilities. Maybe you'll also receive a small profit, extra money back to you. This is generally a conservative estimate, but we do not guarantee it. We are licensed real estate agents, not securities brokers, so we cannot promise a specific return on your investment. However, we aim to give you a cautious estimate of how everything works.
Remember, most full-service rental programs operate on a 65/35 or 50/50 split, with 65% going to you to cover everything. Companies that charge a lower split may have additional fees, such as cleaning costs. If you decide to manage your property yourself through VRBO.com and put in the effort, you can increase your revenue and keep 100% of it.
So, when someone buys a property with cash, carries no mortgage, and uses a full-service property management company, it usually "pencils out" safely and often does a little better than that. If you carry a mortgage on the property, very little of the mortgage gets covered by the rental income. However, if you handle bookings on your own using VRBO.com, working it well and working it hard, you may be able to cover much more of the mortgage or generate more profit for yourself if you own the property outright.
In the past, potential buyer clients went so far as to gather all the HOA dues and utility costs, even creating Excel spreadsheets to compare actual expenses across various condominium communities. They would ask us to spend a lot of time collecting this information, and then they would spend even more time analyzing their data. Eventually, they grew tired of the process because they couldn't find the "secret formula." As a result, they never bought and gave up on their dream.
If you focus on your own purchasing budget or price comfort zone, narrow down to the locations you enjoy and the type of property you would most enjoy. That is the best way to shop. Forget the HOAs and projected rental revenues, as they all pretty much even out. Focus on what is most important to you and your family.
Long-term or Short-term Rentals, Which Rents Better?
Annually, these typically come to about the same. If you rent out your property on a long-term basis, such as a 6 month or 1 year lease, it can often be less to deal with because you just have the one tenant. But renting it out long term means you will probably not get to use it yourself. If you rent out your property on a nightly/vacation basis you'll be able to set aside dates for your own use, or to offer to family and friends. But nightly and vacation rentals can be a lot of work.
Winter or Summer Season, Which Rents better?
We are primarily a ski resort destination town, so obviously, winter bookings are much stronger and are more expensive. Summers have become busier over the years and depending on where in town your property is located you could do fairly well with summer bookings too. Old Town is typically a better summer rental location, with all the summer activities centralized in the Historic Main Street area.
Real World Examples of Purchase Price Compared to Income:
Here are a couple of examples to illustrate all that we have explained above. Again, these examples are intended to help you understand how this all works and are in no way a promise or guarantee of rental revenue or income projections.
Carriage House
Partially Remodeled Affordable 1 Bed, 1 Bath - Purchase Price: $95,000
Property Taxes: $1,050
Annual HOA Dues: $2,808
Known 2012 Rental Income: $10,800 (in a long-term rental of $900 per month)
With this property, the annual ownership cost is about $3,850, not including electric and interior condo insurance. You can see that the income easily covers the cost of ownership, leaving the owner with a little money back each year. Some of these small, affordable condos make great long-term rental properties.
Example created: January 2013
Three Kings Condo
Fully Remodeled 2 Bed, 2 Bath - Purchase Price: $385,000
Property Taxes: $3,293
Annual HOA Dues: $7,308
Known 2012 Rental Income: $15,700 gross / $10,990 net
With this property, the annual ownership cost is about $10,600, not including electric, gas, and interior condo insurance. If the owner used a little less, the income might be more to cover those fees as well. You can see that the income just about breaks even with the cost of ownership. There is no income to cover any portion of a mortgage.
Example created: January 2013
Black Diamond Lodge at Deer Valley
Full Service, Luxury Ski-in, Ski-out 3 Bed, 4 Bath - Purchase Price: $2,350,000
Property Taxes: $15,680
Annual HOA Dues: $20,784
Known 2012 Rental Income: $135,000 gross / $88,000 net
With this property, the annual ownership cost is about $36,500, not including electric and interior condo insurance. You can see that the income easily covers the annual cost of ownership, plus pays out about $50,000 to the owner. The full-service luxury properties do cost more to purchase and cost more in HOA dues, but they do generate more income as well.
Example created: January 2013
Park Avenue Condos
Centrally located, remodeled, affordable 2 Bed, 3 Bath - Purchase Price: $335,000
Property Taxes: $2,600
Annual HOA Dues: $5,544
Estimated 2015 Rental Income: $27,000 gross / $17,550 net
With this property, the annual ownership cost is about $8,144, not including electric, gas, and interior condo insurance. You can see that the income easily covers the annual cost of ownership, plus pays out about $9,400 to the owner.
Example created: August 2014
St. Regis at Deer Valley
Full Service, Luxury Ski-in, Ski-out 2 Bed, 3 Bath - Purchase Price: $1,689,000
Property Taxes: $18,474
Annual HOA Dues: $21,372
Known 2013 Rental Income: $212,687 gross / $103,217 net
With this property, the annual ownership cost is about $39,846, not including electric and interior condo insurance. You can see that the income easily covers the annual cost of ownership, plus pays out about $63,371 to the owner. The full-service luxury properties do cost more to purchase and cost more in HOA dues, but they do generate more income as well.
Example created: August 2014
In summary, we can confidently say that Park City real estate is an excellent place to invest money. If you buy stocks instead, their value can fluctuate suddenly. Real estate typically appreciates more steadily over time as a long-term investment. With a home or condo, you can use it yourself or let family and friends enjoy it. Even if the property's value decreases for a few years, like recently, the property itself remains the same, and you can still use it just as before. The value only matters if you plan to sell. If you purchase a property as an investment, you might be able to deduct trips to check on it (ask your accountant first).
First and foremost, buy for yourself. Don't get caught up in the minor details. It all shakes out quite evenly.
If making money is most important, you may want to keep your money in the stock market or invest in an emerging company, but at some point in life, what are you working for? Owning property in Park City is a great way to reward yourself for all of your life's hard work. It's also a great way to reward your family for their support of you and to spend time together and reconnect with them in a way you simply cannot at home.