Mammoth Real Estate Q&A – HOA Fees, In The Eye of the Beholder

This Mammoth Real Estate Q&A appears in the President’s Weekend 2021 issue of The Sheet.

Q: We read your last Q&A column titled Undervalued and Under Appreciated. We also own a second home in Mammoth and believe the values here are suppressed because of the overall high cost of ownership, especially our high HOA fees. What do you think about that?  

A: The perceived high cost of ownership is in the eye of the beholder. And while some people think the costs are high, others consider Mammoth to be a bargain. But this is a great question and it is worthy of discussion. Owning improved real estate, especially in California, always has significant cost and responsibility. And on these two points, it isn’t for everybody.  

As a starting point of the discussion, there is an amusing aspect of the Mammoth real estate business that becomes apparent to practitioners over time. There is a small cross section of “buyers” out there who think there is some magical way to inexpensively own a place in Mammoth or the surrounding region. They are looking online and attracted to low priced fractional properties, manufactured homes in the local parks, Forest Service cabins, and the like. I’ve communicated with dozens of them over the years. They see a low asking price and think they are the genius who has figured it out. But unfortunately, it doesn’t exist. 

The $90,000 “mobile home” comes with $1,000+ per month land lease and park fees. And other repressive restrictions. And plenty of full-time neighbors. Fractional properties too have high monthly fees and greater restrictions. And the allotted time probably won’t be the holiday or peak periods that they are looking for. And Forest Service cabins are often referred to “summer cabins” for a reason. And there are restrictions. Making them habitable costs money and you’re still on a government land lease (which is increasingly scary).  Ultimately, there is no cheap way to own respectable accommodations in Mammoth. 

Some prospective buyers find the condominium HOA fees in Mammoth to be objectionable. They are the ones who typically never analyze how the fees break down or how they are managed. They are also the ones who rarely purchase. I have owned (and lived in) both single-family homes and condominiums here in Mammoth. And I’ve been on the respective HOA boards looking at the budgeting and management. Either way of ownership there is no escaping the costs like insurance, snow removal (including roof shoveling), the ongoing maintenance at this altitude and dryness, water and sewer service, and on and on. It all adds up whether it is a condo or a home. And there are “economies” in the condominium projects.

One of the things outsiders rarely grasp is the time, labor, and materials that are expended moving from season to season in a mountain resort community. This town spends months moving snow and ice around to make everything tidy, accessible and safe for our valuable winter visitors. Snow and ice removal and management costs serious money. Then as it all melts there is more clean up. As the beautiful winter snow melts away it exposes a giant mess. This alone is the origins of the annual spring Town Clean-Up. The town needs it, bad. The clean-up involves both private and public property. Both property owners are compelled to put their properties in order to get ready for summer. This includes the unsightly snow stakes that have to be removed and stored away.  

The beginning of the warmer months is a rush to bring the landscape back to life so everything looks pretty for the coming summer visitors. The irrigation systems need to be placed back into service. Lawns need to be fertilized and aerated. Everything needs to be tended to. Swimming pools need to be readied. And there are always miscellaneous repairs from the inevitable winter damage (snow removal operations are notorious). 

The warmer months are also when the capital maintenance and improvement projects have to happen; roofs, asphalt, painting, etc.. Many condo projects try to avoid these from happening during July and August to preserve some peace and quiet for the peak summer rental guests and owners. But it doesn’t always work out this way. The window to get things done is short. Winter can come fast.

Just about the time the landscape is looking great and most of the summer maintenance is completed, there is a shift to preparing for winter again. The snow stakes have go back in the ground, the irrigation systems and swimming pools have to be winterized, and plenty more. This seasonal turnover is all necessary. And it all costs money. And it happens whether you own a condo or a home.

There have been other important organizational changes to HOA and property management in the past few years.  These changes have certainly made them more efficient and effective, at least in my opinion. For decades Mammoth’s condominium projects were managed by onsite resident managers (I did a couple of stints at this in the early 1980s). Many of the early condo projects in town were developed with onsite managers specifically in mind. There were/are residential quarters built into the project for onsite managers, and usually adjacent to some sort of office. And many of the offices were designed to serve some sort of rental (STR) function too. There were rental charts, keys handed back-and-forth and stacks of fresh towels.

Laughingly, the history of onsite residential condo managers in Mammoth could actually be an entertaining melodrama/sitcom made for TV. There were many fascinating characters and events over the decades including massive winters and a parade of needy guests. Add in the interaction with a multitude of second homeowner personalities and it really became nearly comical, or tragic. (Truly, not everybody is cut-out to own in an Association). Some of the management/rental operations became multi-generational family businesses. The real money was in the STR/reservations side of the business. And snow removal including owning and operating heavy equipment.

But most local HOAs have abandoned the residential onsite management model. The two big drivers of this were the modern California employee overtime rules, and the “redlining” by Fannie Mae of condo hotel properties some 10 years ago. Most onsite managers were clearly working “overtime” and many of the onsite rental programs fell under the condo hotel guidelines (active “front desks”). The HOA boards were faced with decisions, and most decided to move to the next model. Some of the onsite rental programs moved offsite, while others dissolved and diluted away to other alternatives.

Much of the onsite management is now completed by management companies who have teams of workers who are good in a variety of work and skills. And they affectively do so at a number of projects around town. Their expertise includes spas and pools, landscape and irrigation systems, snow removal, minor construction repairs, etc.. And it is all billed at an hourly rate rather than at some ambiguous onsite manager salary. Some of the previous onsite manager accommodations actually house employees of the management company, and others have become rentals. Many of the previous offices have been shut down and/or repurposed. 

All of this has certainly changed the face of condominium management in Mammoth Lakes. Owners can longer have “cozy” relationships with their onsite manager (which is probably a good thing). The variety of skills and knowledge to maintain the physical plant is no longer left to one or two people who might not have what it takes, and this includes the energy to do so. One irony; STR guests no longer have an onsite manager to go complain to, regardless if they are responsible for the problem or not. It is part of the new Airbnb age. All-in-all the new system works better in most cases. And there are exceptions (the 1849 Condos project would be a good example).

There is another factor that has made HOAs more cost effective and efficient in recent years. It is the evolving California Civil Code component known as Davis-Sterling. This body of law dictates how HOAs operate in the State including budgeting, reserve studies, overall corporate compliance, etc.. As a sidebar, one of the excellent outcomes of this evolving law is the complete HOA packages delivered to buyers during the escrow period. In the past, buyers received a hodgepodge of incomplete information about the HOA. Today, they receive a very complete and accurate package from the HOAs designated “clearinghouse” which is typically their accounting firm.   

The new Civil Code requirements have greatly improved the reliability of HOA operations. The local condo projects that are less than 20 years old have matured during the evolution of these requirements and are typically in sound financial condition because of their compliance from the beginning of their existence. Older HOAs have worked to become more compliant and most have done a great job both organizationally and financially. And again, at least buyers have a complete picture of the HOA that they are trying to buy in to. And owners can be a little more at ease that their HOA board is acting accordingly and effectively. All of this has added value to ownership of the property.

Some of the more exorbitant appearing HOA fees also have to be considered for what they include beyond the norm. Some of the more modern project fees include the gas or radiant heat and the (“endless”) hot water. This can have an added value on average of $2-300 per month. And this can be a real bonus to the owner in a heavily rented STR unit, especially a winter oriented unit. Fixed costs are good for STR operations.

Ultimately, paying the local condo HOA fees are essentially a luxury for not having to hassle with the details of owning and managing a single-family home here. Or they can be considered prudent for utilizing the efficiency of time and money. Both the luxury and prudence are major factors as to why STR works so well in these properties. And STR is what has been driving the increased values of local condominiums the past few years. And as we’ve seen in the past 12 months, when not locked-down or smoked-out, the demand for STR is very high. So whether the local condominium owner values this proposition or not is back to being in the eye of the beholder.

Happy President’s Weekend, or Lunar New Year! Whichever you happen to be celebrating. Enjoy the snow.

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