Sunday, January 6, 2019

R.I.P. Herb, who enabled bottom feeders to rise above the clouds

I read that Southwest Airlines co-founder Herb Kelleher passed away this past week at age 87.  Herb completely changed how Americans and indeed the world travel, by turning flying from a privilege of the rich and expense account business travelers to a transportation option that almost everyone could afford.

I remember waiting to board the very first Southwest flight I took in January 1990.  I had occasionally flown before, maybe once every 2 years or so, but this was completely different.  To begin with, Terminal 1 in Phoenix airport (now long gone) had no air conditioning, and it must have been over 105 degrees farenheit in there.  The people looked like nobody I had ever seen in an airport before, with lots of crying babies.  The boarding pass was a reusable plastic card with no seat number.  I loved it and it changed my life.

Southwest's main competition wasn't other airlines, it was driving a car or riding Greyhound.  For the first time, I could fly wearing shorts and a t-shirt without my mother telling me I had to dress nicely to get on a flight .... between Phoenix and Ontario for 19 dollars.  With the "sub-club" sticker frequent flyer system and all of the easily accessible promos tacked onto it, approximately every 4th or 5th trip was free.  It quickly became apparent that credits I accumulated on short flights back and forth to school within California could be used to fly to more exotic places like Arizona and Nevada, and eventually to Chicago! once those routes were established.  And all those drink coupons! which I couldn't use until I was 21 and even then received more than I could ever spend, but they were useful currency for trading seats.

Over time, word caught on, planes filled up, rival airlines shed costs through bankruptcies, and Southwest was the only practical nonstop carrier on a lot of short routes in the west.  The freebies became more scarce (deja vu?), and their prices increased with inflation, the cost of fuel, and that monopoly power, especially after Herb retired and they clearly focused more on returning shareholder value.  But there were always finagles for those of us willing and able to exploit them, namely the Chase credit card finagles that enable a companion pass, and frequent sales, especially when we could shift our weekends to Saturday-Tuesday.

It's easy to forget how many upstart low-fare airlines there were in the early days of deregulation because almost all of them quickly failed.  Southwest figured it out and thrived due to great management and probably a fair share of good luck.

Thanks Herb.  I'll pour out a little wild turkey on the steps for you.

Tuesday, October 10, 2017

Our New Challenge: Vacation Renting

Our family is embarking on a new challenge.  After selling our all time best investment, a home in Sacramento we bought after the crash for $74,000, we are rolling the proceeds into another home in Indio, CA which we intend to use as a vacation rental property.

We currently live in San Diego and will continue to for the foreseeable future, but real estate here is not a profitable investment.  The Coachella Valley is a natural fit for us, as Nancy and I both come from a long line of desert rats.  We met in Tucson, AZ, where I was in graduate school and she was living, and where her sister lives and we currently own 2 rental homes.  When she was a kid, Nancy used to visit her grandparents and drive their golf cart around the Cathedral City Country Club, just about a mile from where my family used to rent a condo during winter break.  My sister's family lives outside Phoenix and my parents have a home in Rancho Mirage, former and future home of Presidents and Movie Stars.

Indio is an odd place.  It's mostly a working class community that has not seen the best of times, somewhat lacking in tourist facilities such as hotels and restaurants, and whose most prominent construction project appears to be a city jail.  It is close to many resort communities, namely Indian Wells and La Quinta.  However in recent years it has shown up on the cultural map, thanks to the Coachella Valley Music and Arts Festival, which apparently attracts 250,000 people, and its country music sibling Stagecoach, located at the Empire Polo Grounds.  These two events, and to a much lesser extent the BNP Paribas Open tennis tournament in Indian Wells, cause rental prices to skyrocket for 3 weekends a year.  Indio is attempting to build on these events by billing itself the "City of Festivals" and organizing several other minor events during the year but none have the draw of these places.  In 2016, there was also a huge event called Desert Trip, featuring the Rolling Stones, Bob Dylan, the Who, Paul McCartney, and Neil Young -- a constellation of brilliant aging rockers appealing to America's most income-disposable demographic -- but that seems to have been a one-off event that was not repeated this year.

So apparently the finagle of owning a rental property in Indio is to capture the high daily rates during those 3 events in March and April, and keep it busy during the rest of the winter or rent to a Canadian snowbird from November through February.  (Unlike Americans, apparently Canadians can still afford to retire or at least take winters off, and many of them come down to the Palm Springs area.)  Then, anything you can get between May and October is gravy.  The number of vacation rentals seems to be increasing quickly so at some point it may make more sense to revert to a full-time rental.

Real estate in the Coachella Valley, and around Palm Springs in particular, has the peculiar feature of being laid out in a checkerboard pattern, with land in each square alternately available to buy from the previous owner, or lease long-term from the Agua Caliente Cahuilla band of Native Americans.  Thus, many of the available properties in our price range, especially condominiums, have both an HOA and a land lease.  You can get a mortgage but the term must end at least 5 years before the end of the lease.

We weren't sure whether to buy a full-time rental or a vacation rental.  I had read a blog post on the AirDNA analytics website suggesting that Palm Springs has one of the best vacation rental markets in the country relative to the cost of investment, which made us look more at vacation properties.  While this may still be the case, after more research on AirDNA, including a paid subscription, I take their conclusions with a grain of salt.  Their estimates seem to be flawed.  For example, I met the owners of a property that AirDNA projected would have income of about $90k/year and they told me that was about twice what they actually were getting.  Another property in the area AirDNA projected $200k/year for a property with only 3 reviews.  I suspect AirDNA extrapolated those 3 peak weeks when this house was rented out to the entire year, even though it is occupied by the owners the rest of the time.

That said, we did a lot of research on where to buy all over the valley, but almost accidentally stopped at an open house that is walking distance from the Empire Polo Grounds, in the Indian Palms Country Club community and wrote an offer.  It's a beautiful 3-bedroom house built in 2005 and in mint condition.  Indian Palms is a nice, laid back gated community with a golf course, a few community pools, and a "Lifestyle Center" with a fitness center.

We will be listing this on AirBnB in the next week or two and will "soft open" by offering it at a low price initially, in order to accumulate some positive reviews.  If you are interested in staying in it, please let us know.

Sunday, March 22, 2015

Tuesday - Huelva

Contents:
Introduction
Day 1: Flight to Spain and first evening in Seville
Day 2: Sunday in Seville
Day 3: Monday at the Alcazar
Day 4: Huelva

Our friends Ken and Martha, and their kids Alex, Abi, Andre, and Athena, are living in Huelva for the year.  Huelva is an hour west of Seville on the Atlantic coast, about 30 minutes drive from the border with Portugal.

Wednesday, March 11, 2015

Sunday in Sevilla

Contents:
Introduction
Day 1: Flight to Spain and first evening in Seville
Day 2: Sunday in Seville
Day 3: Monday at the Alcazar
Day 4: Huelva

Sleeping Saturday night for the first time in about 36 hours, we awoke at the crack of noon.  Fortunately, that was about the extent of our jet lag for the week.

We met up with our friends again at Prado San Sebastian.  When you travel with your kids and you don't go to Disneyland, you have to incorporate some of this:

Tuesday, March 10, 2015

The Flight to Spain and the First Night in Sevilla

Traveling to Spain

Since we would be spending a lot of time in airports, I splurged on a pair of Admirals Club passes
bought on Ebay for $35.  Each is good for 1 person plus kids, for as many airports as you will be visiting that day.  American Airlines sells them at the door for $50 per pass.  In retrospect, I don't think I would pay more than $5 for the privilege of sitting in an Admirals Club unless I were by myself and had work to do.  We almost missed one flight, and the time when we were stuck hours at the airport, we had to be at the gate because we didn't know when our flight was leaving.

Monday, March 9, 2015

Disneyland too expensive? Spain may be a better option.

Dearest Internet,

After an extended period of introspection and apathy, I write you from a small but lovely apartment in Seville, Andalucia, Spain.  If you don't want to read the details, skip to The Finagle, below.  Details on our trip will be added as I write them.