Lifestyle investing- resort condo

[Rema Organ]

I’ve looked through the fb page and in the forums but can’t find much in regards to this topic. I’m curious on what people opinions are on investing condos in resorts. I’ve heard people refer to them as Condo-tel. Does anyone have any experience with this type of investment? 

[Michael Baum]

Hi @Rema Organ! This is a good question. I have some experience with this, but only to avoid it. My experience:

When my wife and I first started looking at a vacation place we had 3 area's in mind, all withing 6 hours of our home. Lincoln City, OR (flood insurance was astronomical), Bend Oregon and Coeur d' Alene Idaho where I grew up. We finally found a great place on Lake Coeur d' Alene and have had a great year this year.

We really like Bend, OR. Fun place, lots to do, and popular. We were looking at the Inn at the Seventh Mountain. It was a Condo Resort type thing. Prices were very cheap with some rather expensive HOA fees, but manageable. The big issue was the special assessment for deferred maintenance. We were just getting our feet wet so we were looking at a Ski Condo which is a about 700sqft unit with a small bedroom. Cozy, good for a couple skiing or with some small kids. Price was only about 35k. Special assessment was about 30k on the unit.

Anyways, the biggest issue was majority shareholders. In these types of situations, you can get one family, business or organization who owns a majority of the units. In this case it was the Pape family of Oregon. They own a huge Caterpillar dealership chain in the northwest. They owned the majority of the units and controlled the condo board thus had controlling votes to make decisions. Often those decisions can go against the other owners wishes or ability to pay.

In the case of the resort, the Pape's had spent a lot of money upgrading the amenities which was great, but it didn't address the deteriorating siding and roofs on the buildings. So there was a special assessment done to make those repairs which had to be done at the cost of millions. Many minority owners were forced to sell their units just to get out from under the assessment.

There were 3 bed/3 bath top floor units going for 50k as their assessments were over 350k each. People had owned those units since the creation of the Inn as family getaways and they were forced to get out as they couldn't pay.

So we just decided to walk away from it. Eventually all the assessments were paid, the buildings were replanked in HardiPlank and stone and look great. The Pape's sold all their units to Worldmark so now it is under their control.

The reviews are just average with most people not thinking the cost of points to stay there are worth it. There are some private units. Some are for sale and the prices are pretty high. A unit like the one we were interested in is asking 174k.

So, that is my experience. I am sure not every place is like that but you really need to do your due diligence. My 2 cents.