Disclaimer: This author recognizes that Mammoth property owners, both owners of condominiums and single-family homes, are successfully renting their properties to nightly renters, and some or all of these activities may be in violation of Town of Mammoth Lakes ordinances or zoning regulations and/or may be in violation of governing CC&R’s and By-laws. This author is simply reporting on these activities and not promoting or condoning these violations. (But if the economic conditions continue, I may be a fool not to get back into the business I was in 20-25 years ago.)
That darn Internet, it is disrupting lives all around the world. It isn’t exactly causing mass rioting or toppling dictators here in Mammoth, but it certainly is changing many facets of Mammoth real estate. It is changing the demand, usage, the “visioning” by prospective buyers, and sprouting new economies and changing old ones. And stuck in the middle is the Town of Mammoth Lakes, a government entity like all government entities that is looking for increased revenue. Conversely, the consuming public is downright trying to evade taxes (imagine that). I’ve talked about this in the past, but the opposing forces are growing more apart every day, but changes may be in the offing. And increasingly it has become more and more about “heads in beds” in an upscale home near you.
What makes this so noteworthy at this time? First of all, someone turned on the demand switch for single-family homes in the $900K to $2M range. The current supply is a relatively small assortment of older and newer homes, some REOs and short sales (although the truly stressed properties are quickly being worked through this segment of the market), and some that have been on the market for years. And some were once listed at much higher dollar amounts. But buyers and prospective buyers are sniffing all around this segment of the market. No one knows for sure just why––maybe they think inflation is looming, maybe “it’s time” to get on with it, maybe they’re trying to outdo their neighbors, or maybe they just realize they are purchasing at or below replacement cost. And this isn’t my babbling hyperbole.
A prevalent theme for many of these prospective buyers seems be “we can rent this.” They seem quite convinced of that. It is clearly driving purchases. But this a rather interesting phenomenon—-––people who want to buy a million$ plus home and let other people rent it while they’re not using it. And how do they know they can rent it? They know first hand. The renters are becoming purchasers. And they have a bunch of “friends” who will rent from them, especially if their place is nice, and fun to hang out at. What also makes this so noteworthy is that these new transient landlords aren’t even relying on the now-blasé resources like VRBO and VacationRentals.com. They have a growing number of friends, and if you’re not a friend, you’re not invited. My hunch tells me friends don’t pay bed tax either. The underlying theme is really nothing new here in Mammoth, but some of the methodology has. But it is definitely happening more and more in the high-end home market. People love renting these homes. It almost seems like renting (whether you are the landlord or the tenant) a luxury home in Mammoth has become a new “cool’ underground activity. Being in the Village might be the “in” thing for some, but renting a really nice home is the real luxury. Maybe there’s a strong market for Black Passes after all. And now it is driving sales in the high-end home market. Meanwhile, more and more existing owners who have never previously rented are moving into some rental activity to help offset overall costs, many with a “why not everybody else is?” attitude.
The VRBO/Vactionrentals.com method of doing business has evolved too. Or devolved in some eyes. It has become a wheeler-dealer “Let’s Make A Deal” place for rental transactions. That is, if it’s not the holidays. This is still the dominant realm of condominiums. Renters want to negotiate everything from rental rates, to cleaning costs, to not paying bed tax (13%, for what?). But the next generation/iteration of transient landlords is moving away from the traditional VRBO/Craigslist model too. Most of it is still about Internet marketing, but also personal relationships, “close friends,” etc. In some ways this has come full circle: in the 70’s and 80’s Southern California fireman already had this system well in place, their association/trade magazines were full of Mammoth condos for rent. The condos were owned by firemen and predominantly rented by firemen, and there were plenty of “deals” and trade-out cut along the way (and of course nobody paid bed taxes).
Another significant shift are the reservation companies now placating, and even working with, the self-marketing self-booking owner. As the VRBO phenomenon grew in the past few years, owners who were on established rental programs started booking themselves and taking away available nights. This caused friction in many places. Not only was there a perceived loss of income on the reservation company’s side, but who was going to clean the unit after an owner’s “guest” and assure it is ready for the next “real” booking. And who was accountable for which problem and/or repair? The reservation companies feared becoming used as cleaning services. And that’s not where the profits is. All of this new way of doing business created animosity between owners and rental agencies. Now it appears they have found some middle ground. The companies are accommodating the self-renting owner but want the peak period rentals in exchange for their overall service. Some companies are processing the dollars (and taxes?) for self-renting owners. This is will evolve, and there’s sure to be more future friction. That darn Internet.
With all this custom renting the microeconomics grow. The growing air service alone has bloomed the local taxi business. I see new taxis and taxis that look like billboards. The taxis are great but taxis are even better for renters of more remote single-family homes to get back-and-forth to their favorite restaurant or bar. Especially if it is snowing hard, or they’re drinking hard. But luxury home rentals also increase the demand for more services to the individual properties, from basic high-level maintenance, to additional spa care, to demo ski delivery, to pizza delivery, to home chefs, and massages. The menu and breadth of services continues to grow, and the renters themselves are just beginning to realize what is available and how much they like the extra touches. The owners of quality homes are certainly eying these opportunities for themselves too. Having some special amenities to your property is great but having some special services makes it that more desirable. Besides, your “friends” will love it, and you will too.
But what about the collection of bed tax? This seems to be a growing concern amongst the proletariat. The average citizen in Mammoth doesn’t want to think people aren’t paying their fair share. The Town Finance Department’s study of the last few years basically said it was a non-issue, or no significant loss. But many see it differently (like those of us who try to show upper-end homes that are always rented). The quandary the Town continues to dance around is how do you collect tax for an illegal activity? Maybe medical marijuana has given us a clue. But now all those bureaucrats who believed their study have been chopped by the new Town Council. And now they have hired a new Interim Town Manager who has a strong finance background and has been described as a “bloodhound when it comes to finding money.” With the Town Council’s “new culture” being hired this issue of collection/enforcement/whatever-it-is-going-to-be will come to a head. Or they’ll continue to dance around. The operative words are likely to be “interim” and “bloodhound.” This will get interesting.
Meanwhile, the price support continues for condo hotel units in Mammoth. For better quality units we may/are seeing a slight move upward (more babbling and hyperbole). This is clearly a reflection of increasing rental revenues. Regular air service is not hurting these condo hotel properties, but in this segment of the market it is still all about convenience for the renter. Appreciation in the condo hotels is critical for Mammoth if it ever hopes to see the additional synergy at Eagle Base and the Village. And we’re a half-baked resort town in many eyes without it.
Reading the renter’s comments on the websites of high-end rental properties can be very enlightening. Many times the happy renters are far from the normal recreationalists that are drawn to Mammoth. Instead many are old friends or a “reunion” groups meeting for some quality down time and taking in the marvels of the Sierra, especially in winter. There are many Mammoth homes where just looking out the window on a beautiful winter day can be exhilarating (especially for city dwellers). Maybe we need to remind ourselves again why people come to the Sierra, to re-create.