The compelling facts …
What if … Only 5% of the Bum Baby generation learned about a cost-effective way to own more than 1 retired home? 75 million boomers will retire over the next 15 years, 5% equals a requirement of 250,000 condo hotel units per year, each year 2020 units.
What if … you could buy a second home / condo, use it when you wanted to, and a professional (hotel manager) optimized your rental income and minimized expenses while not in residence? Would this be more desirable than the do-it-yourself alternative for at least 5% of the population?
What if … you can subtract some homes instead of just 1 or 2?
What if … can you say you have condos in Town & Country and on the Slopes and Coast? And all these condos cost less than just a traditional second home?
What if … all these properties valued as your home?
The Condo Hotel option will be the choice of more than 5% of Baby Boom generation, and the trend is just starting. The condo hotel industry will also inspire new life and prosperity in the catering industry, making quality and hotels & # 39; best located & # 39; more profitable than ever. The Condo Hotel will separate the real estate business from the hotel service business and create a victory for condo hotel ownership and hotel guests. Finally, retirees of the next decade will wait longer and be able to afford a higher lifestyle through the condo hotel. These are the premises of this paper.
BOOMER GENERATION POWER …
Why Are Baby Boomers Important?
The 81 million US Baby Boomers * (born between 1946-64) began reaching retirement age (59) in 2004. 28% of the US population is a Baby Boomer. 2016 is the culminating year, with birthdays of 4.3 million 59 years old. A Boomer turns 50 every 7.4 seconds this 2005!
* Many non-US Boomers. will choose to retire in the US to be closer to the best healthcare system in the world.
per year: 4,000,000
per day (4.0 mil / 365): 10,958
per hour (10.6 k / 24): 456
per minute (456/60): 7.1
Boomers have just begun buying their second homes / pensions.
Michigan has 234,000 second homes, California has 237,000 and Florida has 483,000. 6.4 million people own a second home, up 40% since 1995. By 2010, about 10 million people are expected to have a second home, despite 9/11, a 56% increase in just 5 years other and can be considered a boom market by any measure. More people will buy in the next 5 years than they have in the last 10 years, competition for the desired retirement residences will only intensify, valuation will follow suit. Low rates have helped fuel this real estate market, but they are a smaller part of the equation than is commonly believed. Foreign exchange rates have a much more dramatic inflationary effect on tourist real estate.
The trend began in 2001, and intensified as interest rates dropped in 2002-03, prompting some boomers to "buy early". Real estate further became the "du jour" investment as it became clear in 2001-02 that the stock market was not returning the level of return on investment "that many boomers had built around retirement savings expectations.
This lack of security and control in the stock market, and its positive effect on real estate investment, will be discussed further in this report.
In addition, second home ownership tax deductions have helped encourage second home ownership, says the Wall Street Journal "In addition to low interest rates and demographics, the second home market has been aided by the Taxpayer Assistance Act. 1997, which introduced new rules for dealing with a capital gain in a principal residence.In the old law, income taxes were deferred if the seller purchased a new home of equal or greater value up to two years before or after primary home sales., sellers over the age of 55 may request a one-off exemption of $ 125,000. "
The new rules abolished the compulsory benefit and increased the exemption to $ 500,000 as long as a taxpayer owned and used the principal residence for two of the prior five years of the home's sale date. Plus, the exemption can now be claimed every other year.
These tax changes "relieved" sellers of the pressure for trade to avoid a tax hit. Instead, says a NAR spokesman, it has encouraged many sellers to trade in more modest digs while using residual income to buy second and third homes. Tax changes have created a whole new form of & # 39; trading & # 39; estate, where there is a tax advantage to buying a new home every 24 months, allowing for a win-win capital at a zero tax cost. For many investors I guess, this has created a & # 39; cottage industry & # 39; really at home.
"The second home market can accommodate 100,000 to 150,000 new housing starts a year over the next 10 years," estimates David Hehman, CEO of EscapeHomes.
But why second homes? As many professional people have discovered, as technology allows us to & # 39; work from anywhere & # 39 ;; why not work from a beautiful place, somewhere & # 39; like vacation & # 39; from the cottage? The evolution of the home office has turned into the cottage office.
The typical vacation buyer is 55 and earned $ 71,000 in 2003, while investment property buyers had an average age of 47 and earned $ 85,700.
For properties purchased between mid-2003 and mid-2004, the average price of a vacation home was $ 190,000 compared to $ 148,000 for investment homes. In contrast to the latest full-year price data available in 2001, holiday homes have appreciated 12.8 percent from $ 168,500, and investment homes have risen 25.4 percent from $ 118,000.
Almost one in five second homes will become the main residences after retirement – 27 percent of vacation homes and 14 percent of property for investment. "In addition, buyers were looking to diversify portfolio investments," Mansell said. "This is now the most cited motivation for buying a second home." In listing the reasons why they bought a second home, respondents said there are some differences depending on the type of home. Overall, 30 percent of buyers wanted to diversify investments, 28 percent sought rental income (37 percent investment versus 7 percent vacation homes), 14 percent wanted a personal or family retreat (29 percent vacation versus 8 percent investment), 6 percent planned to use for vacation (16 percent vacation vs. 2 percent investment), and 5 percent had extra money to spend.
"Because the typical buyer of a second home is a baby boomer, it is likely that sales of second homes will remain historically high over the next decade," Lereah said. "Boomers are still in their earliest years and have the desire to buy holiday homes and investment properties." Ninety-two percent of all second home buyers see their property as a good investment. Moreover, 38 percent said they would most likely buy another home within two years, breaking into 47 percent of investment buyers and 16 percent of vacation home buyers.
The 9/11 effect and family values are another unforeseen phenomenon that many experts see when discussing the second home market. The theory says that while Americans were shocked by the events of 9/11, they wanted to create more & # 39; family time together & # 39; and made together at holiday destinations, where distant family members could be reunited as a whole unit. Car destinations were first to experience the effects on family tourism from 9/11, these tourist sites within a 2-5 hour journey from the metro areas actually saw an increase in occupation shortly after 9/11. The theory is still evolving, but through my surveys of boomers, this effect has merit in cottage demand. The paddle holiday home is still the fastest growing market.
Can the demand for second homes, resort property and retirement homes really be measured or is it just another version of the real estate investment hypothesis? A new study by the NAR shows that 23 percent of all homes purchased in 2004 were for investment, while another 13 percent were holiday homes. In addition, there was a record 2.82 million second home sales in 2004, up 16.3 percent from 2.42 million in 2003. The home investment component increased 14.4 percent to 1.80 million in 2004 from 1.57 million in 2003, while sales holiday homes rose 19.8 percent to 1.02 million in 2004 from 850,000 in 2003.
Figures have merit and factual measurements. Real estate values in almost all areas & # 39; holidays, resorts & pensions & # 39; have stimulated the overall market with double digit (alarming) tariffs. America's working communities are not only lagging, but in many cases fall in real value (when adjusted for CPK I inflation).
(A note on inflation and currency: Very often we read reports about the rising value of assets as real estate without discussing the cost of inflation in those increases or the currency exchange value used to evaluate the asset. the dollar falls in the purchase value by 30% against other currencies, the value of the respective fixed assets should increase by 30% respectively (if they are desirable for purchase by foreigners). of foreign investment will appreciate soon after the dollar falls, and fall if the dollar strengthens (Hawaii around 1990) .If the Consumer Price Index (CPI) rises by 3%, then the value of a home rises by 5% with it has really only increased by 2%, worrying about this author that this is no longer openly discussed by our mainstream press, which are by profession journalists of rank. liberal arts, not MBA. Look at the real level of inflation-adjusted valuation, without the media hypotheses.)
Can these high levels of appreciation in the second home market really continue? Many experts believe, "Yes!", Can stay for the long term (not months, but years). The basics of quick valuation equate to supply growing slower than demand. Supply in areas such as South Florida has been rapid (78,000 new or planned condo units entering the Broward / Dade district market by 2007), but material shortages and hurricanes have slowed expansion and created an amount large embedded demand reduce supply. Also, the demand of foreign buyers in the Miami area is extremely high, which means these buyers are using currency that is 20-30% stronger than last year. A 30% increase in property values is easily absorbed in this environment.)
In areas such as Arizona and Las Vegas, water concerns and lack of infrastructure and skilled workers have slowed the pace, but the level of growth is still stunning. Other scenic second home destinations, such as the mountain states, the Pacific Northwest, and the Florida Keys, have environmental barriers that raise access barriers for developers and limit supply. A limited supply in the face of demographically driven demand is always a formula for quick price appreciation (CA in the 1970s).
What goes up should it go down? Yes. But a 20% increase per year for 5 years, followed by 5 years of stagnation or a 10% loss, is still 5% + annual growth rate (worst case). If you get 90%, the return on your initial investment is still 44% a year. The hard part is making sure the best years are at the beginning … even hard is selling at a peak. It is estimated that there are between 40-90,000 new condo hotel units coming on the market by 2008.
Demand for these units will exceed 1 million buyers, so the price of condo hotel units may well be much higher than currently expected.