Host, Christine Karpinski:   Today our guest is Dorothea Lowe. She's a real estate broker with offices in Red Lodge, Montana, and Detroit Lakes, Minnesota. She's originally from Berlin, Germany and has been in the real estate business for most of her life, at all different capacities.

She founded her own business, Sky Lodge Properties, Inc., in 2003. Red Lodge is a resort area and prominent vacation rental area as well. Her websites are MontanaHereICome.com and MinnesotaHereICome.com.

Thank you for joining us, Dorothea.

Guest, Dorothea Lowe:  Oh, thank you for inviting me. I really appreciate the opportunity to talk to you.

Christine:  Oh, it's lovely to talk to you. I have been a fan of your newsletter for many years. I've gotten your newsletter for I can't even tell you how many years. Dorothea writes a really interesting real estate newsletter. Is it monthly?

Dorothea:  Yes, at the end of each month. I have over 9000 subscribers now.

Christine:  Wow! Amazing, 9000! And it's a very interesting letter. You don't write it from a basic real estate perspective. You often have some insightful stories in there. I just find it enjoyable to read all the time.

Dorothea:  Well, thank you.

Christine:  Yeah! So we're going to talk a little bit about Montana. I've been watching that market for many, many years. I always say that Montana is one of those places where I can kick myself for not buying a long time ago.

When I first started looking, properties were so affordable in Montana. You could buy beautiful properties on huge pieces of land with all these amazing views. Maybe even a stream on the property, and they were very reasonably priced. Tell me a little bit about what's happened to those properties today.

Dorothea:  Well, the land prices have just about doubled. They went up tremendously over the last two years. The home prices, when I came here in 2002 they said, "Oh, the home prices double every 10 years". Now it is down to double every five years, and the land prices are doubled every two to three years. It's just really wild.

Christine:  It's a great place to invest.

Now I imagine you get this question quite often. If the prices just doubled in the last couple of years, what makes me think that it's going to continue? Do you have any sort of insight, or maybe gut feeling about how the market is moving? Because right now we're hearing a lot about how this is a softer market, the real estate bubble's popped. Not that I personally buy it; I think that real estate, especially for second homes, is pretty good. But what is your take on it?

Dorothea:  Well I think people really want to get out of the crowded areas, the crime ridden areas; all of the places that have disasters. Montana has a really nice climate, especially here in south central. We are more or less at the edge of a desert, and we get almost 300 days of sunshine a year. We don't have a whole lot of rain; we have just enough snow to keep us amused.

We have a nice ski hill here and then we have the spectacular Beartooth Highway, which goes over 11,000 feet high into the Yellowstone Park. There are 1000 lakes here in the National Forest.

Christine:  Wow!

Dorothea:  It's really nice, but you have to hike and you can't buy anything on the water except on these little mountain streams.

Christine:  Right.

Dorothea:  That is really expensive. That's really expensive. There's a beautiful little cabin that's an older cabin from the 70's, available on a small lot on the water for $450,000.

Christine:  Wow. That's close to beachfront prices, for ocean front. That's definitely a lot more expensive.

Dorothea:  Yeah, exactly.

Christine:  What about accessibility for Montana? I know that that was one of my fears as far as when I was personally looking, that it wasn't going to be as accessible as some of the more popular destinations back when I was looking, probably eight or ten years ago, at Montana. How has that changed?

Dorothea:  Well, Billings has a commercial airport, and there are a lot of flights coming from Denver and Salt Lake City and from Washington. We are about an hour from Billings, and Billings is the largest city in Montana. It has 120,000 people now, and a lot of industries are moving in there.

At this little town which is 45 miles up the road, they have an oil refinery, and the oil refinery is expanding, and they're building a Wal‑Mart there. So Billings is moving west.

Here we are the recreational part for Billings. All the big wigs, they want to live down here.

Christine:  It seems to be that vacation markets do well within a two to six hour driving distance from major metropolitan cities. You're right, when I first started looking, there weren't that many flights into Billings at all. It was a couple flights a day, but now it's so much more accessible than it was in the past.

Now, when you're looking for a home in Montana, what are some things that you would recommend to a first‑time buyer coming to the market, coming to that area? What are some things that you would recommend?

Dorothea:  They really need to latch onto a knowledgeable realtor, because there are a lot of areas in Montana that are dry, and they have very, very slow wells. They hardly pump water. Then in that case they have to pump the water overnight into cisterns to have enough water during the day.

Or what's even worse, your well dries up and then you have to haul water. You have to get a truck and a big tank and go piggy‑back and get water. Or you can hire somebody who does that. There are actually water companies that carry water around and put it into your cistern.

Christine:  That's interesting. It's not something I would have thought of, when looking for property that you've got to be concerned with your water resources, especially because, like you say, there's so many lakes around that you would think that it would be a bit more accessible.

As a rule, even though I am a big advocate of renting your vacation home without the use of a property manager, I never, ever, ever recommend anybody purchase a vacation home without the use of a knowledgeable realtor.

Your real estate agents are really, really important because they know the area. There's no way you could walk into an area and know something like, you've got to worry about the wells. What are some other things that people need to be looking for?

Dorothea:  Well, if you are near water, you want to be especially careful whenever it's for sale by owner because that mostly means that the realtors won't touch it. There is an issue with the septic, because you need to have a special septic pump and all that if you're near water, and if that's not in place, then you're probably looking at a really expensive deal before you can even move in there.

Christine:  So are there laws and restrictions and stuff regarding all the water? I imagine, with such a limited supply and with the septic systems and all that, are there pretty stringent laws in place?

Dorothea:  Yes, and they are getting stricter all the time because we are in a drought now for ten years, so they are very, very restrictive what you can do with the water. You can't even water your lawn. I.

If you have a field and a pasture, and you think you get 20 acres, you can have a couple horses, well, you've got to be careful if it's in a dry area, those 20 acres are not enough for two horses.

Christine:  Very interesting.

Dorothea:  Yeah. And then also, if you buy into a very dry area that is away from the mountains there are a lot of rattlesnakes. So you want to stay near the mountains, the mountains are the ones that collect the water, more or less, in Montana, and sends it down in aquifers underground, and in little streams and creeks. So the closer you are to the mountains, the better chance you have at the water.

Christine:  Now what is the typical cost of, say, a home in your area? I know you said that the one little cottage might be $450,000, if I wanted to come in and purchase a property, what would I pretty much have to spend?

Dorothea:  If you wanted a nice setting, you're probably looking at $400,000 or more. In the nice areas, you want to be farther away, but then you have to look at trailers, and most people don't want to look at trailers. So you want to be in a nice area, and then yeah, it's getting pretty expensive around here.

Christine:  Now what about amenities, what are some amenities that people would want to look for in a vacation home, because maybe the renters would want it?

Dorothea:  Well, definitely a mountain view, that's why people come to Montana, they want to look at mountains, that's number one.

And then of course if you can have a little creek or a little stream, that is also a big bonus. And then the more people that can sleep in that house, the better, the more money you can charge for it, because they can bring their whole family, and it does make it worthwhile.

And for winter you definitely want a hot‑tub and a fireplace, even if it's just a gas fireplace, for all the skiers that want to get warmed up.

Christine:  Makes sense.

So Montana is really a year‑round destination, isn't it?

Dorothea:  Yeah it is, because in summer you have the parks and all the beautiful hikes and fishing, and in winter you've snowboarding and skiing, and then of course Red Lodge has a restored downtown, which is really pretty, all these old street lights, and has more restaurants per capita than any other town in Montana.

Christine:  Oh wow.

Dorothea:  A lot of people come here, and a lot of festivals, and a lot going on, and street walks, and it's just really a lot of fun.

Christine:  They do a fair amount for tourism, to bring tourists in to the area it sound like, huh?

Dorothea:  Well, they're starting to wake up to that fact a little bit. Before I got here they were really kind of clamed up, they didn't really want to advertise the area, they wanted to keep it just the way it is, but I think word just got out in spite of themselves.

Christine:  Now, if you buy a property there, do you know if you have to collect and remit sales taxes?

Dorothea:  Yes, there is a seven percent sales tax and a three percent resort tax.

Christine:  OK.

Dorothea:  So that's bad, but otherwise there is no sales tax in Montana.

Christine:  Do you know if there are any areas where there are restrictions, and people wouldn't be allowed to rent?

Dorothea:  Actually, not around Red Lodge, because that is just a really big industry around here. But there are little mountain communities that have a very fragile environment, and so they are gated and they discourage that, because it would just be too much wear and tear there. If you have a semi‑arid area stuff just doesn't grow right back after you walk over it. You can see tire tracks for years sometimes.

Christine:  We see pictures of Montana on the television or in magazine or newspapers, and you don't think about it from that perspective, that it's such an environmentally sensitive area.

Now, what about rental revenue, do people do pretty well with renting their vacation homes in that area?

Dorothea:  Yes they do. the ones that have the high‑end do best. I just sold an $840,000 home that sits on the hill that has a tremendous mountain view; it looks like a big ship sailing through the mountains. It attracts a lot of people, and that brings in at least $60,000 a year.

Christine:  So that's a property that can indeed break even.

Dorothea:  Yeah they can, because it's such a desirable area. And some people flow over from Jackson Hole, Jackson Hole just gets too expensive, and Cody is getting too expensive, which is in Wyoming.

They come over here to Red Lodge, but then they are high‑rollers, like one family just paid $17,000 for one month to stay in their vacation rental. But they want to be catered to, you know, everything has to be done for them, and there is more and more of that.

Christine:  Where they want more services, or they may want housekeepers, and cooks, and chauffeurs, and all of that.

Dorothea:  Yeah, definitely.

Christine:  But even for that, $17,000 for the month, if you're talking full‑catered and chauffeured and all that, it still isn't that bad. I mean, one HomeAway there are some properties that rent for $40,000 a day, you know.

Dorothea:  Oh really?

Christine:  Yeah.

Dorothea:  My goodness.

Christine:  Yeah, there are some spectacular places that will come with a yacht and Hummers and Rolls‑Royces, and it's really kind of crazy, but that is definitely pretty expensive, $17,000.

But it sounds like Montana is doing pretty well, it really hasn't been sort of hit by the real estate bubble bursting. And you're continuing to grow, and it's still a really good place to purchase properties.

Dorothea:  It is, yes.

Christine:  Now, do you know if the owners, who rent their properties, do they primarily use property managers in that, or are a lot of them renting by owner?

Dorothea:  Well, a lot of people are out of date and still like to use a property manager, but of course you can do it by yourself. I had a vacation rental once, and they told me on the Internet they wanted to rent, I said "OK", I sent them the check, I sent them the key, and I told them "Leave it clean" And they did, It worked like magic.

Christine:  Yeah, I know, it's amazing how good people are, isn't it?

Dorothea:  Yeah.

Christine:  There really are more good people in this world than bad. Well, Dorothea, I really enjoyed talking to you, we're running out of time.

Quickly before we go again, I want to give Dorothea's contact information again, her name is Dorothea Lowe, and she sells properties in Red Lodge, Montana, and she also sells in Detroit Lakes, Minnesota.

So if you're interested in either of those areas, Dorothea is a very qualified real estate agent. She really knows here stuff. She's very passionate, and knows the areas where she sells her homes. I highly recommend you at least subscribe to her newsletter, because it is a great newsletter.

Again, your websites are?

Dorothea:  MontanaHereICome.com and MinnesotaHereICome.com.

Christine:  Excellent, and we'll have links to those on the Owner Community.

Thank you again for joining, we really enjoyed it.

Dorothea:  Thank you very much for inviting me.