By: Mike Kennedy April 17th, 2008 Category: Deep Creek Lake Buyer Info, Vacation Rentals

If you currently own a vacation rental home at Deep Creek Lake or considering purchasing one - there are a few interesting trends and insights that continue to evolve in our resort real estate market.

RENTAL BOOKINGS UP

Railey Mountain Lake Vacations reports that rental bookings are up about 7% this year compared to last year - even with the price of gas reaching record highs. Most local business owners have said that the Deep Creek Lake area actually benefits when the price of gas goes up - the reason being is that vacationers from Baltimore/DC and Pittsburgh actually choose to drive the shorter distance to Deep Creek for their summer vacation as opposed to the Outer Banks, Myrtle Beach, the Grand Canyon, or Disney World in Florida.

Larger Rental Homes Still Doing Well

Another trend reported is that the larger homes (8 or 9 bedrooms), with amenities such as an indoor pool, are still doing extremely well - and most continue to see annual owner gross rents increase. In fact one of the larger “pool houses” with an incredible lake view will probably generate gross rents in excess of $200,000 in 2008 - which would be the first time a rental home has broken that barrier. This proves that you don’t really have to be lakefront to be one of the better rental homes - an incredible lake view is something most renters desire.  Since most of these larger rental homes get rented on the weekends during the non-summer months - Railey Mountain Lake Vacations is now pushing mid-week corporate retreats that will probably increase the gross rents even higher in these homes.

The “WOW” Factors

If you are considering purchasing a vacation home at Deep Creek Lake and want to maximize rental revenue below are the ”wow” factors that make a good vacation rental home;

• Updated and Above Average Decor - this may be the most important thing to have in your home. Renters want a certain standard of furnishings in a home they rent. This can make a tremendous difference in the amount of rental income you can generate.
• Lake Front or Lake Access Setting.
• Log Cabin - people really like that warm, cozy feeling of a cabin in the woods.
• Big Views of the Lake or Mountains - people want to be blown away by a view they can’t get back at home.
• Private Indoor Pool.
• Home Theatre.

Some factors that detract renters - or the “Un-Wow” factors (if that is such a word);

• The setting is “too” residential.
• Duplex/Townhouse/or Condo - most renters want privacy on their vacation.
• The Interior and Decor are below minimal standards.
• No Access to Deep Creek Lake.

Real Estate Opportunities

Railey Mountain Lake Vacations reports their is still great rental demand for larger rental homes at Deep Creek Lake - 8 bedrooms or more. Our inventory of larger rental homes has not grown much at all since 2003 when more restrictive zoning measures were enacted. Their are still opportunities in this current real estate market to take advantage of this trend. You could (1) buy an existing rental home for sale that already has good rents, (2) buy a really good lot and build, or (3) buy an existing home for sale and modify it so it can be a good rental. Finding an existing rental home with a high rental history is sometimes difficult - the good ones usually get snapped up right way. The more likely path to owning a good rental home would be to either build a new house or renovate an existing one. New construction obviously has a time element involved - but there are currently some really good lake view lots for sale at price points that could make sense building a new house - even if you have the added cost of a sprinkler system and other fire code measures that are required today.

Modifying or renovating an existing house is certainly another option to consider. One of our clients purchased a lake access home with a decent view of the lake a year or so ago - then added an indoor pool and now has annual gross rents exceeding $90,000. 

We hope these vacation rental trends continue. No one would have ever predicted the houses with indoor pools would have annual gross rents between $150,000-$200,000 - but it is happening. What’s the next big thing for these rental homes? Who knows - maybe an indoor bowling lane?

By: Mike Kennedy April 10th, 2008 Category: Deep Creek Lake Real Estate

In 2007, Deep Creek Lake area properties south of the Rt. 219 bridge were reassessed. In 2008, the lake area properties north of the Rt. 219 bridge will be reassessed - this will include those of you who own property along Marsh Hill Road, atop Wisp Ski Resort, Deep Creek Drive, Lakeshore Drive, Stockslager Road, Shingle Camp Road, and Sandy Beach to name but a few neighborhoods. In 2009, all other areas of Garrett County will be reassessed.

Below are the average increases reported by the Assessors Office from their 2007 assessment;

• Lakefront Land                                                                  12%
• Lakefront w/Improvements (meaning it has a house)       33%
• Lake Access Land                                                              36% 
• Lake Access w/Improvements                                           42%
• Lake Influence Land (meaning it has just a lake view)      36%
• Lake Influence w/Improvements                                       40%
• Deep Creek Condos and TownHomes                               22%     

The Assessors Office uses the prior 12 months of actual sales as the basis of their assessments. However, when viewing these numbers keep in mind the increases are shown over a three year period since the last reassessment in 2004 - which was right in the middle of a very strong real estate market here at Deep Creek Lake.

These reassessments conducted in 2007 became effective January 1, 2008 and will be the basis for the tax bills that will be sent out on July 1, 2008. Also, these assessment increases are phased in over 3 years at 1/3 of the increase per year. However, if you are permanent resident of Garrett County the Homestead Credit Law now limits any property tax increase to just 5% - something very beneficial to those who qualify.

By: Mike Kennedy April 3rd, 2008 Category: Deep Creek Lake Real Estate

The Deep Creek Lake Maryland area was just recently named “Best Four Season Spot” by Forbes Magazine. The article appeared yesterday in the online edition of Forbes and quoted our own Railey Realty salesperson Adam Cowgill. The article’s “In Depth” slideshow also displays one of our lakefront homes for sale, listed by Jon Bell - a $3.3 million custom home on Paradise Point Road.

Very rarely does the Deep Creek Lake real estate market get the national media attention it deserves. It’s nice to finally see a respected media company such as Forbes take notice of the Deep Creek Lake/Garrett County area and favorably compare us to such bigger named resort areas as Lake Tahoe, Bal Harbour Florida, Telluride, the Hamptons, and Hawaii.

By: Mike Kennedy March 28th, 2008 Category: Deep Creek Lake Buyer Info, Deep Creek Lake Market Update, Deep Creek Lake Real Estate

An article about buying a vacation home recently appeared on the CNN/Money.com website. It’s a pretty good article - and is basically about how right now is a good time to buy a vacation or second home. The author also does a good job of giving tips on how to buy a second home - from identifying the primary reasons you may want to buy a second home to suggesting that you first rent in a resort area to see how well you like it before taking the plunge and buying. 

We certainly agree with the main aspect of the article - that it is a great time to buy property at Deep Creek Lake and in Garrett County - interest rates are down and demand certainly isn’t as high as we had previously seen during our boom years just a few years earlier. These two factors can certainly help the chances of a prospective buyer getting better terms. In fact at the end of last week one of our clients locked in an interest rate of 5.625% on a conforming loan that they will be using to purchase their lake view vacation home.

However, there are a few things to point out in this article that just don’t relate to the Deep Creek Lake real estate market.

First, the author tries to generalize that all second home markets are “soft” right now. While demand is down slightly from our boom years - “soft” is hardly the case here now. Just in the last three weeks we have closed on a lakefront house at Sandy Beach for $1,379,000 (that had competing offers), a timber frame home atop Wisp Ski Resort for $1,250,000, a lakefront house on Marsh Hill Road for $880,000, and two other lakefront homes for $865,000 and $750,000 respectively. And just today one lakefront house in our market had 3 competing offers! I would hardly classify this type of activity as being “soft”.

Another thing the author tries to generalize is that the appreciation rates in all resort/second homes markets declined in 2007 - or are expected to decline in the near future. Once again, that’s not accurate for the Deep Creek Lake market. In 2007, the average sold price for a residential property in the Deep Creek Lake area was up approximately 4% over the average sold price in 2006 - from $537,498 to $559,168 - a modest gain - but at least a gain unlike other second home markets.  It is accurate to say that the value of a piece of property at Deep Creek Lake has held up much better than a property in other resort markets - such as Las Vegas, the Atlantic Coastal beach areas, and Florida just to name a few. This fact is just another reason to buy here at Deep Creek Lake - where historically the appreciation rates have done much better and should continue to do better than other resort areas. The main reason being that the lake is almost fully developed now - there just a few smaller tracts of land that have frontage on Deep Creek Lake or have access that can ever be developed in the future. Low inventory and continued demand should continue to fuel appreciation for lakefront and lake access homes in our market.

By: Mike Kennedy March 14th, 2008 Category: 1031 Tax Deferred Exchanges, Deep Creek Lake Real Estate

This past week the IRS released a ruling that finally addresses some of the questions surrounding vacation and second homes and how they can qualify as a safe harbor in a 1031 tax deferred exchange. A 1031 tax deferred exchange is very common at Deep Creek Lake because of the mixture of homes that make up our market - a majority of vacation homes around the lake are used strictly for personal use on weekends, holidays, and summers - but we also have many homes where the owners will use the property for their own personal enjoyment and also rent it out as a vacation rental.

Previously, their has been a lot of grey area on this subject - the questions most asked were “How much personal use is too much if I want my property to qualify?” and “How long do I have to hold this property before it qualifies?”

With this ruling the IRS now says that if you own a vacation home and have some personal use in it, you should own it for at least two years before an exchange, rent it out at fair market value for at least 14 days in each of the 2 years, and limit personal use to 14 days or 10% of the days rented, whichever is greater. If you follow these guidelines and standards, the IRS states they will not challenge whether or not your property qualifies for a 1031 exchange.

The bottom line is that this is pretty good news for certain people looking to buy or sell a second home at Deep Creek Lake. This ruling can provide much more flexibility to someone down the road looking to change locations. For example, someone who now owns condo in Ocean City - uses it occasionally and has followed the rules above - can now sell that property, pay no taxes on any gain, and then buy something at Deep Creek Lake. However, it must be pointed out that the replacement property would also have to meet the standards above and a few other rules as well to qualify.

Disclaimer - as always this post should not be construed as any type of tax or legal advice. Consult with your CPA or Tax Attorney regarding for further explanation on these types of transactions.

By: Mike Kennedy March 6th, 2008 Category: Deep Creek Lake Real Estate

Attention all you investor type buyers. This real estate listing just went back on the market  - it’s located at 79 Cedar Shores and is being offered for $1,345,000. It’s a vacation rental home and is professionally managed by Railey Mountain Lake Vacations. The rental name is Cedar Chateau.

It has 8 bedrooms (6 of them being Master Suites), a 27 foot indoor pool, 10 flat screen TV’s, and is fully furnished. The property does have access to Deep Creek Lake but does not come with a deeded boat slip. You have views of the lake and Wisp Ski Resort and the house is complimented with interior finished hardwoods, cathedral ceilings, and 2 native stone fireplaces.

For all you investor types out there - this house generated a little over $107,000 in gross rents for all of 2007. The main reason it did such high rents is (1) because it has an indoor pool and (2) the newer construction/quality of the home’s interior. A good rental house does not have to directly located on Deep Creek Lake. The rental houses with indoor pools can command premium rents and renters will pay extra to have nicer amenities. We Realtors like to refer to these types of houses as the “Pool Houses” - and since their are only a handful in our entire market they usually attract a great deal of attention from our investor type buyers.

Give us a call or shoot us an e-mail - any of our sales agents would be more than happy to explain how the vacation rental program works and the associated costs and expenses of owning a investment property like this.

By: Mike Kennedy March 1st, 2008 Category: Deep Creek Lake Real Estate, Wisp Ski Resort

Some more quality exposure for Deep Creek Lake and Wisp Ski Resort. It’s nice to see the area getting the attention of a national publication and a Baltimore television station as of late. Here is a link to an article about the area that appeared in the Spring 2008 issue of Luxury Living Magazine.

It is interesting to note that the author of the article lives in Park City, Utah - which is another resort area with a much larger ski area than the Wisp. The author really has nothing but good things to say about the area and favorably compares the lifestyle and activities offered at Deep Creek Lake to those found at the larger western resorts. 

The author does touch on a few real estate items in the article. She notes that a brand new home at Deep Creek Lake that costs $1.3 million would be considered a “steal” in Park City - where $1.3 million would only you buy a 2 bedroom fixer upper. Sure Park City and some of the other bigger resorts are larger than the Wisp - but Deep Creek Lake is much more accessible and easy to get to for someone from Baltimore, Washington D.C., or Pittsburgh.

We have many clients who own vacation homes here and in other resort areas - and speaking with them they always tell us they spend more time here at their Deep Creek Lake house than at their other vacation homes in other resort areas. When you factor in ease of accessibility, the lifestyle offered, and what you can get for the money - there is no doubt buying a second home at Deep Creek Lake is a great value compared to other resort areas.

By: Mike Kennedy February 27th, 2008 Category: Deep Creek Lake Buyer Info, Deep Creek Lake Real Estate

If you are thinking about purchasing a lakefront home for sale or real estate at Deep Creek Lake there are some very important things to pay attention to during the buying process.

The Setting and Lake Frontage

First and foremost, it’s important to understand that not all lakefront lots and parcels at Deep Creek Lake were created equally - some are level, some are flat - some have lots of trees that block the view from the house, some have wide open expansive views of the lake - some are very private, some the neighbor’s house is very close - some have good water depth most of the year, some are tucked back at the end of cove and have no water depth after Labor Day each year - some have 100 feet of frontage which is the norm, some have between 50 and 100 feet of frontage, and some have 200 feet or more of frontage.

Obviously the homes and lots that are mostly flat, have wide open lake views, have more than 100 feet of frontage, and are private will cost you more. But the good news is that the ones with the premium settings have shown a tendency in the past to appreciate better in the long run. 

Everyone’s preference to setting is different -and there will probably be trade-offs that you need to be make along the way - but when you are looking at a lakefront house just keep one little thought in the back of your mind - you can always change the house but you can’t change the setting.

Boat Dock Type

Most lakefront home and properties around Deep Creek Lake have a Type A Dock. What in the heck is a Type A dock you ask? Well, it’s simply the designation placed on the dock structure and permit provided by the Maryland DNR. A Type A dock is allowed to have 2 power boats and 1 non-power boat moored at it.

The lakefront homes and lots that don’t qualify for Type A docks will usually have access to a deeded boat slip in a Common Boat Dock somewhere in the neighborhood. You will usually see these advertised as having a Single Slip. These common docks are not private though - meaning you are usually sharing it with a few neighbors and the prices for these types of properties are usually a little less overall than those with a private dock.

Believe it or not there are actually a few lakefront homes and lots around the lake that don’t qualify for either a Type A dock or have a deeded boat slip - but these are few and far between.

Buy-Down Parcel

Take note of whether the property you are looking at has acquired the Buy-Down parcel from the state of Maryland or not. We covered some of the basics of the Buy Down in this post. You can’t do much with the Buy-Down other than say you own a little more property - but there a few benefits to owning it - 1. You can get what they call “relaxed” standards if applying for a zoning variance and 2. if you are on a septic field and it fails, you can apply to the state to get permission to extend your drain field in to this parcel. So overall there is some benefit and value to owning the Buy Down parcel.

By: Mike Kennedy February 22nd, 2008 Category: Deep Creek Lake Real Estate

It’s no secret that many vacation and second home owners here at Deep Creek Lake greatly enjoy the peace and relaxation that comes along with owning real estate in Garrett County - but there are other benefits to owning a second home that sometimes go unnoticed - most notably the various tax breaks allowed by the IRS.

The Rules 

In simplistic terms, the IRS allows most second homes to be treated in one of the  following three ways - depending mostly on how much you use or plan on using the property;

1. for personal use
2. as a rental property
3. or a combination of the two

Personal Use

If you truly use your Deep Creek Lake property as a vacation home for personal use as defined by the IRS there are a couple of tax breaks you may be able to receive. The IRS stipulates that a property is considered one for personal use if during the tax year the owners occupied it more than the greater of 14 days or 10% of the total days it was rented to others at a fair rental price.

• If your vacation home is classified by the IRS as one that is used for personal use - you can actually rent it out for 14 days or less each tax year and NOT have to report any rental income  - this is essentially tax free income - but conversely in this scenario you wouldn’t be able to deduct any rental expenses incurred during the days rented either.
• Also, if you fall into this personal use category, all property taxes and mortgage interest on your second home can be deducted if the total amount of mortgages against your primary residence and second home is $1 million or less.

Renting Your Property Out

Their are certain tax breaks as well for those owners who decide to rent out their vacation homes and personally use it less than 10% of the rental each year. If you fall into this rental classification by the IRS you must report all rental income - however, the good news is that the IRS allows you to deduct all legitimate property expenses associated with owning the home - like taxes, utilities, homeowners insurance, HOA dues, maintenance, and depreciation. Some vacation home owners can legally show a deductible tax loss which could ultimately reduce the total amount of taxes owed to the IRS.

Combination of Personal Use and Renting It Out

If you combine personal and rental use - you can deduct the appropriate percentages of expenses based on the amount use. For example, if you use your second home 40% of the time for personal use - you can deduct 60% of the expenses if it is truly rented out that percentage of the year. Important point here though - remember if you rent it out more than 14 days you must report ALL rental income.

The $500,000 Capital Gain Exclusion

If you know you are going to sell your vacation home at some point in the future and will probably have some type of sizable gain you may be able to qualify to exclude up to $500,000 in capital gains on your second home sale. This is accomplished by turning your second home into your primary residence. How do you do that? Well, the only way to do this and stay within the IRS rules is to make your second home your primary residence for two of the five years prior to the sale. Obviously, this takes some long-term planning and foresight to accomplish but it could mean a tremendous tax savings in the long run.

Disclaimer! Please note this post in no way is meant to give out tax advice. It is strictly to provide some basic (and we stress the word “basic”) ground work about second home ownership and how it relates to income taxes. Everyone’s tax situation is different. You must consult your CPA, tax planner, or attorney to make sure you are properly following the IRS rules as they pertain to second home ownership before proceeding.

By: Mike Kennedy February 19th, 2008 Category: Deep Creek Lake Real Estate, Fractional Ownership

One of the newer trends in our real estate market here at Deep Creek Lake has been the introduction of fractional ownership. The first fractional offering was developed by a company called Second Homes at DCL. This concept has been a little slow to catch on in this market  - there have only been a handful of fractional sales in the past year or so. But fractionals are huge in other resort markets - like Park City Utah, Steamboat Colorado, and Vail to name just a few. It’s only a matter of time until the fractional concept catches on here at Deep Creek Lake and Garrett County. 

What is fractional ownership? In a nutshell, it’s owning a fee simple ownership percentage in a property - the most common in our market being a 1/6th ownership. For your share you get the ability to use that property 1/6th of the year - or in other words 8 weeks out of the year - (52 week less 4 weeks reserved for maintenance divided by 6 fractions). And then the 8 weeks you can use it usually get broken down by the season - you can use the house for 2 weeks in the summer, 2 weeks in the fall, 2 weeks in the winter, and 2 weeks in the spring.

Pros & Cons - It’s important to note these are NOT Timeshares or Residence Clubs. These properties are fully furnished, fully decorated and ready to go when you arrive at it - all the way down to having a full roll of toilet paper hanging in the bathrooms. Other than buying groceries you will spend no time maintaining the property….no cutting grass, no changing light bulbs, painting, etc. 

While this fractional concept isn’t for everyone looking to buy a vacation or second home - it does open up a unique opportunity for those looking to purchase something they may have not had the means to do on their own. Basically, it makes these types of properties more affordable. For a little over $329,000 you can buy part of and enjoy all the benefits of a lakefront home that would normally cost well over $1,000,000 by itself. And you can split the ongoing costs and maintenance expenses - like real estate taxes, HOA dues, and utilities - six different ways now. On the flip side though, you do only get to use the property 8 weeks out of the year…..but most survey’s show that vacation home owners only use their properties 8-10 weeks each year anyways. And if you decide your deeded interest can be sold, willed, or gifted at a later date.

Current Offerings - If you are still interested please contact us about the current fractional ownership opportunities in this market. We are the only real estate company in the area right now offering fractionals. Below are some of our offerings - it’s a nice mix of the different types of properties you can find at Deep Creek Lake;

• 1/6th of a lakefront home in Waterfront Green for sale for $329,000
• 1/6th of a lakefront townhome at the brand new Creekside condominiums for $259,900
• 1/6th of a lake view townhome at Overlook Villas for $259,900
• 1/6th of a lake access home with indoor pool at Cedar Shores for $299,000
• 1/6th of a lake area duplex style townhome at Northlake Village for $119,900

In future posts about this topic, we’ll work through some of the math and show you how all the numbers work - and we’ll also try to better explain how the usage rotation works as well - but until then please use this post as a starting point to better understand this unique concept in property ownership.