Greetings from Gruene! Second Shelters contributor Andrew Chalk was kind enough to head south to the Texas Hill Country and check out second/vacation home real estate in the beautiful New Braunfels area:


New Braunfels may be the most popular location in Texas for vacation homes. Little wonder, given the natural beauty of the Guadalupe and Comal rivers, the rolling countryside of the southern rim of the Texas Hill Country, picturesque village of Gruene and amenities. Recently, I was the guest of the New Braunfels Convention & Visitors Bureau for a few days. Over the next few weeks, I am going to write about different facets of the New Braunfels area for the prospective vacation home buyer. You’ll want to stay tuned. I will address all price points and also cover a little of the lifestyle of the area. Today… I’m gaga for Gruene.

The Guadeloupe River at Gruene

Gruene is a historic Victorian town that has been carefully preserved to keep its small town atmosphere. I could walk my dog the length and breadth of the town each morning because it was so compact and our accommodations were perfectly located, just on the edge of the village. We stayed in one of the condominiums at The Village at Gruene. This development was completed in 2008 and offers single level homes on three floors serviced by an elevator situated at the front of the building but cleverly disguised as a grain silo. Local real estate agent Susan Phillips of A1 Vacation Realty is a realtor at The Village at Gruene and manages 13 properties for their owners. She showed us a three bedroom unit similar to the one that we stayed in, on the market for $364,900, fully-furnished. A buyer could purchase today and lease it out tomorrow. Rental rates are $375 per night in the October-through-March off season and $500 in the peak season. HOA fees run about $240/month.

Candy baby, here is your Hill Country version of Christian Louboutin: a four-master suite penthouse available for a cool $1m. The balcony is the largest in the complex and features a large bar and game area. With those four master bedrooms several couples could be here comfortably, simultaneously.

Penthouse Balcony at The Village at Gruene

The view from the top floor penthouse is of the Guadalupe down through the trees (shown in summer).

Holiday rentals dominate Gruene Road going into town. Recession, what recession? There are signs posted everywhere about new construction. Condominiums and townhomes are the dominant new property types in the village. Houses are more common in some of the other area that we will discuss in future articles. Readers should be aware that the New Braunfels area has strict zoning ordinances regarding how residential real estate can be used for vacation rentals. In order to avoid running afoul of these, do work with a local broker.

The Town

The layout of the town of Gruene is unusual. From The Village at Gruene we found we could either walk along the road to the center of town (about 300 yards) or take a parallel path that was rather like walking through each property’s back yard (though quite legally). It is actually a path that preserves the privacy of residential properties while letting you take a bee-line to restaurants and bars on the way to town. At night it was easy to find the action as live music is ubiquitous in Gruene. Gruene Hall is reputed to be Texas’ oldest dance hall and has hosted such stars as Willie Nelson, George Strait, Leon Russell, Asleep at the Wheel and Ray Wylie Hubbard. They were unfortunate to miss us on our February visit but the hall was still alive with live music all day Saturday and Sunday. The temperature reached 70ºF during the day so languid evenings allowed outdoor live country music performances at a nearby bar. The wine tasting bar just 100 yards north of the center of town also had a full patio late into the evening.

We ate at the famous Gristmill River Restaurant and Bar, so named because it used to be an old cotton gin. The location, perched over the Guadalupe, is spectacular and the menu of familiar chicken, beef and fish dishes, along with sandwiches and soups, is priced at a point where ordinary families find it affordable. At Saturday lunch over 300 diners were there and the restaurant was only about half full.

My dessert at The Gristmill River Restaurant and Bar. Just minutes later, this did not exist.


We found it possible to get into all venues and there were spare parking places at the weekend when we were there. However, the situation is very different in the summer. The large outfitters’ parking lots on the Guadalupe that were empty in February are packed in the summer. The river looks like a parking lots of ‘toobers’ (as tubers are called), and parking and restaurant reservations are tight. This is when vacation rentals can really pay for themselves.

Financing

I spoke to mortgage broker James Racanelli who is based in New Braunfels and lives in Gruene. He says that mortgages are available, but the conventional 30-year fixed rate is difficult. Most buyers would use a 5 year ARM with a 15 year amortization and rates on a vacation home will run about an 1/8th or a ¼ of a percentage point above those on a first home. This includes condominiums. The big change since the “nuffin’ down, buy from yer prison cell” days of 2007 is that good credit is essential, and lenders check.

Location

Gruene is not only just minutes off I-35, it is also only 40 miles from Austin and 30 from San Antonio. Dallas is a more robust 240 miles and Houston is about 160 miles away. That adds up to major accessibility from all major population centres of Texas. Susan Phillips described how the mix of visitors changed seasonally. In the summer the village is populated by short-term guests from Houston, Dallas, College Station, Austin and even Mexico. In the winter there are longer-term guests who come in January and stay through the end of March. They hail from such places as Wisconsin, Minnesota and Canada. The Greater New Braunfels Chamber of Commerce throws a large reception for them. There is a also a corporate relocation market that creates a demand for temporary lets.

Joel Kotkin, the provocative urbanist and Forbes contributor whose latest book is The Next Hundred Million: America in 2050, is so right on the ball. Contrary to the elitists’ proclamation that all of us should ditch our autos and be crammed into an “urban core,” Joel thinks suburbia is not all that bad and is, actually, rather a pretty good place for families to live and thrive. Sure there’s a place for urban cores,  but they are increasingly becoming havens for the uber rich. San Francisco, for example, has the highest percentage of individuals living on unearned incomes! (I call these folks children of the Golden or Lucky Sperm Club. Of course,  many of them may have made a killing in the market and are living off the interest.) The outlying, auto-dependent areas where land and affordable housing is available is where most people settle. Also out there: jobs for the real people who keep the cogs turning. That’s what stimulates “upward mobility” among the lower and middle classes, keeps our economy humming, and ultimately funnels more Lucky Sperm Club folks to San Francisco.  Joel’s latest Forbes.com column focuses on the 2010 Census and what it showed — and he was right on the money, honey. Americans are continuing to “disperse, becoming more ethnically diverse as I pointed out in NG and leaning toward to what might be called “opportunity” regions of the nation.” That is, suburbs. In Texas!

I visited Joel and his precious wife, Mandy, at their home in December. They have a charming house in a beautiful, leafy part of the city known as Valley Village; their lot is generous and dotted with colorful citrus trees. A neighbor is Isaiah Washington, who played Dr. Preston  Burke on Grey’s Anatomy. Like all of us, the Kotkins keep track of home values in their ‘hood and track nearby celebrity homes:

“They are always doing something, working on that house,” Joel told me of the Washington home down the street.

Homes in Valley Village range from the $300′s to well over $2,650,000. But of course: this is Los Angeles. We spent a lot of time talking about what the Texas equivalent of the Kotkin home would look like — but I don’t think Mandy is ready to move out of Cali yet, though we both think the Lone Star state should give Joel an honorary home.

Maybe he could win this 2,900 square ft, four bedroom, three baths, gourmet kitchen and study area home by Darling Homes in Prosper, a Texas suburb growing like weeds! Hardwoods in the entry, kitchen, nook and family room, and many upgrades including landscaping, stereo system, and even Epoxy Paint Coating on the garage floor! Best of all, this home is practically FREE. That’s right. Darling homes has donated this $370,000 valued home in the country-like setting of Prosper in Whitley Place to benefit ManeGait, a non-profit therapeutic horseback riding center situated on a beautiful, rolling 14-acre site in Collin County, the fastest growing area of the DFW Metroplex. Founded by business and community leaders Bill and Priscilla Darling, ManeGait delivers the best in equine therapy in a caring, high-integrity environment.

Mary Ann and Fred Davis bought a home in Naples, Florida for $200,000. 2400 square feet and 40% off what it sold for in 2005. The home is in a gated community and they plan to keep it as a second home/family retreat for years, hence no pie-in-the-sky buy and flip notions. I’ve got more friends snapping up properties in three out of four of the nation’s hardest hit markets: Florida, Phoenix, and Idaho. (Sorry, no one I know cares to buy in Las Vegas.) This home was a short sale purchase. And according to Zillow economist Stan Humphries, this may be a great time to pick up a second home as long as you keep it for many years…

If you are going to buy investment property, you want a place where your home/land etc. is going to appreciate, right? And we all know the messages received across most of the country is fat chance, bubba. Sure, real estate in (drowning) Phoenix and Vegas is so cheap you can buy a home once listed at $1.5 million for $500,000. But here’s the thing: what are you going to do with it? Lease it, OK, to who? Where are the jobs, where are the people moving in to work and lease from you. I told a client the other day, if you want to invest in real estate, at least buy in Texas where we have decent job growth, universities, and a youthful age demographic.

Now comes word that Fort Worth, Texas grew 38.6 percent in the last decade, beating the bejesus out of every other Texas community. Even Houston, which is not too shabby, and San Antonio, where I have had zero problems leasing a rental property — multiple calls per day. Here are the stats from the Fort Worth Star Telegram of the largest counties in Texas: Tarrant county is third, behind Harris and Dallas. The way I see it, I want to buy investment property where people are moving and working, so I may be looking for some good buys in Fort Worth. Holler if you see any.

If you own a second home in New York but don’t work there, you may soon be taxed like those who do, even on income made outside of the state. I love New York City and would be there every other week if I could. But I doubt I’d ever own property there, or could afford to.  After a recent series of court rulings, this feeling could spread. A New Canaan, Ct. resident who works in New York City and owns a second vacation home on Long Island has been told by an appeals court he must pay income taxes in New York City and state — among the highest in the nation — on income generated outside of the state even though he and his wife live in Connecticut. The reason? They own a year ’round habitable vacation home on Long Island.

John Barker, an investments manager for Neuberger Berman in New York, bought a home (with his wife, Laura) in Napeague, Long Island, between Montauk and Amagansett, (Johnny Cash’s daughter, Roseann, lives there), for $260,000 in 1997. Mr. Barker works in New York City. From 2002 to 2004, the period that was assessed for back income taxes, the Barkers said they spent only a few days a year at the Long Island home, usually during the summer. They have a permanent residence in New Canaan.

The new ruling apparently applies only to people who spend more than 183 days in New York, which naturally includes anyone who commutes to the city. (Lawyer question: what if you commute but do not spend the night in the city?) New York law requires people who work in New York to pay taxes on any income they make in this state. But they generally haven’t had to pay New York taxes on income they make outside of the state, or on their spouses’ income, if the spouse works elsewhere.

This could all change with this court ruling. And I have first hand knowledge this is sending many celebrity second home owners packing.

The recent ruling, an appeal of a 2009 decision, effectively re-interprets what counts as a permanent residence and says if you own any year round habitable property here, you are a New York state resident.

New York tax code specifically excludes “a mere camp or cottage, which is suitable and used only for vacations,” as a permanent home abode. Now New York tax experts say this interpretation/ruling is saying summer homes count as permanent residences. Long Island is loaded with summer homes. And who doesn’t want to own a NYC pied a tierre?

The appeals court that upheld the ruling says who cares how the homeowners intend to live in the home. The point is the home could be used all year long. The Barkers’ Long Island summer home is about 1,122 square feet with heat, electricity, and internet service, which the court says “makes it very habitable and comfortable year round.” The fact that Mrs. Barker let her parents stay at the home during winter months proved it was a year ’round residence, said the court.

The Barkers say  they use the home only a few days a year, and the refrigerator is even always empty.

I want to know more: did the Barkers ever lease out the house as income producing property, and if so, would that have changed the court’s ruling? Secondly, are second home owners in places like the Hamptons who live out of state going to rush in and yank out heating systems in an effort to avoid being taxes as a year ’round residence? Does having an out house qualify a home as a “camp”?

The extra taxes will cost the Barkers $1.06 million, and I’ll bet his attorney bill is almost half that. Those attorneys also say they don’t think the decision can be overturned.

It is a tribute to the power of the real estate market that one of the major advertisers in this year’s game, again, is HomeAway.com. (Click here to see their unique, customizable spot — travelers can insert their faces as a main character in the commercial and vacation rental home owners can feature their listings. I’m even in this one!)  The Austin-based firm offers a comprehensive on-line smorgasbord of vacation homes for rent, what many of you may know as VRBO (vacation rentals by owner) dot com. The company is doing extremely well, and growing, because more Americans want to monetize their vacation home properties, and more families want to stay in private homes when they vacation.

But HomeAway.com is not the only one doing well: Dallas Forth Worth home rentals are up a whopping 3271% increase, year over year, all thanks to the Super Bowl. Says HomeAway:

When we examined the number of renters who say they want to rent for Super Bowl weekend specifically, we found that for the Miami area, Super Bowl weekend in 2010 received a 232 percent YoY growth in demand from travelers. Again, keep in mind that Miami Beach, South Beach and Miami consistently ranks as one of the most popular vacation destination among all destinations on our site, so to grow an addition 232% is very good. In looking at Super Bowl weekend for this year in Dallas – we examined the number of inquiries from travelers to the DFW area — the results are a 3271% YoY increase.

Dallas/Fort Worth is doing much better on a percentage basis than Miami- but given the smaller sample size (less than 100 homes in D/FW on HomeAway.com and VRBO.com site vs. more than 1,500+ homes in Miami). this isn’t an apples to apples comparison. Still, more evidence that Super Bowl XLV has been great for Dallas/Fort Worth real estate.

HomeAway also tells me there are a number of D/FW owners who have entered the vacation rental market in the past month or year, chiefly to gain from Super Bowl weekend. The number of properties on HomeAway.com has grown by 240 percent,  year over year.

You do recall former NBA champ Michael Jordan.  Not only is he known as “the greatest basketball player of all times” but he is gaining a rap as the greatest home builder of all times! Jordan is completing a 28,000 square foot mansion in The Bears’ Club, Palm Beach County, Florida, near where Tiger Woods just completed his grand estate. The builder: Lavelle Builders out of Jupiter, Fla. Of course, Tiger’s estate is surrounded by water on three sides to,  perhaps, keep the paparazzi (among other things) at bay. Jordan’s mega-mansion, which is still under construction, is not even close to the water. But it now goes down as one of the largest, most expensive homes ever built in Florida that is not on the water, says real estate agent Jeff Lichtenstein of Christie’s Great Estates and Illustrated Properties. Lichtenstein knows of what he talks: he sells real estate in the Palm Beach area, which is notoriously filled with high net worth people who like to enjoy a second or third home here because here they have it all: a backyard marina for their yachts, sea, beach, and plenty of gorgeous Florida sunshine.

Oh yes, and I almost forgot: golf.

Though waning with the general population, the wealthy still love to tinker on the greens. Jeff’s father, Cary Lichenstein, was a golf rater for GolfWeek Magazine and has been playing since he could walk. In fact, he lives so close to Jordan — in Admiral’s Cove – the elder Lichenstein could lend a hammer or nail to the twenty million dollar project.

The Jordan home will have 11 bedrooms, sits on a three-parcel site right in the backyard of the uber exclusive (and hard to get into) Bear’s Club. Let me put it to you this way: it costs $350,000 just to call yourself a member of the club. The area is loaded with courses designed by Jack Nicklaus, but he personally plays at Bears Club — so basically this area is golf nirvana and the membership list is a regular Who’s Who…  stars, Fortune 400 execs, and the Nicklaus family.There are 55 residences ranging from $4 million on up to, well, probably Jordan’s home. When complete, Jordan’s mansion will be a contemporary with Spanish-style roof — this I have to see. It will have four separate structures: A main house, a guardhouse, a guesthouse and a poolhouse for the mammoth swimming pool. In other words, the largest spread in the ‘hood.

Neighbors once included chanteuse Celine Dion, who ran into a few problems with her HOA over her desire to add a commercial recording studio or music room to her property — deeds are so tough in this ‘hood that even if a home burns down, you have to re-build it to look just like the original home. I mean, can you imagine the disaster if a Mediterranean went up right next to — another Mediterranean?

Jordan paid $4.8 million for the land and is spending an estimated $7.6 million for the construction. The Lichtenstein boys estimate that the total booty will top $20 million, and they worry a bit about re-sale value:

“It would be interesting to see what the Jordan home resells for, being that its location, while great for MJ’s privacy, is not ideal for resale to the usual trophy-and-yacht buyer,”says Jeff.

Only his banker knows for sure!

1. Second home trends: Affluent Baby Boomers will retire later and downsize from their large McMansions for which utilities and taxes have become prohibitive, to smaller homes, maybe condos,  in the city and a second home — in the cheaper boonies, or in another city. Just last night a reader emailed me that his biggest dream is to own a second home condo in Quebec! Cripes, even Disney is getting into this market.

2. According to a study by E360 Global Research, 45% of current second home owners think now is a great time to buy a second home. Of those, Mexico has a strong pull for almost half — and this survey was done in August, 2010. The drug cartel crime in Mexico is isolated to certain areas, they believe.

3. Of the 54% who say now is not a good time to buy a second home, most say the next two years will be. E360 (who provided much of this information) expects big growth in the second home markets surrounding highly populated areas.

4. Most people want a second home as a vacation haven to de-stress. Most prefer a lake or ocean view, with a mountain view coming in second. North Carolina, for example, is one of the fastest-growing second home destinations.

5. What kinds of amenities are second home buyers looking for? Good question. To some extent, they want great medical facilities (resuscitate me!) and a spa. Golf and eco-green based living also does not turn them on. I’ve read that many want to re-live their college years, with classes and intellectual stimulation (and pot?) nearby. Boulder, Colorado is home to a lot of intelligent people and gaining a large second home population, for example.

6. Pricing sweet spot: $200,000 to $400,000 and pay cash, if possible. I mean, those 401Ks are doing so well, right?

7. Vacation and lifestyle are the reason 46% want to buy; another 41% want to buy for investment. Only 11% give a rat’s tooshie about retirement.

8. 49% of second home buyers want a single family home, and 60% just want a 2 bedroom, 2 bath floor plan.

9. 49% of second home purchasers will buy domestically, but a growing contingent is eying Mexico and  Central America — Costa Rica, Ecuador, Panama — as a low-cost of living second home and place to retire.

10. The second home won’t be too close to the first: 30% of buyers want to be 100 to 300 miles from their primary home; 40% want to be 500 to 1000 miles from the primary home; 11% are willing to be more than 1000 miles away from the primary home.