The Lot Deals
Two new lot deals hit the market this week in the Manhattan Beach Sand Section. An old duplex located at 1613 Highland Avenue sitting on a 1,351 sq. ft. lot asking $1,849,000 and a crumbling concrete pad located at 2613 Crest Drive on a sizable 3,512 sq. ft. lot asking $5,499,000.
These new offerings are sure to grab the attention of eager house hunters looking to build their dream home. Will these lots pencil for a motivated buyer who not only wants their dream home but also wants to come away with some equity? Let’s check out the data.
2613 Crest Drive Analysis
This lot has been a noticeable vacant lot overlooking Bruce’s Beach for years. Finally, it has come to market and offers, per the listing description, “unique potential for four levels of 180 degree sand and white water views…build your dream home up to 7,780 sq. ft.”
Certainly this lot offers an amazing opportunity for an incredible home, but no one likes to over-pay. All of the comps are lot sales in 2015, so there is no clear data on what a new construction home might command. Take a look…
2600 Highland Ave, a 1,751 sq. ft. lot sold for $3,100,000
2519 Bayview Drive, a 1,755 sq. ft. lot sold for $4,000,000
2520 Manhattan Avenue, a 1,757 sq. ft. lot sold for $4,000,000
217 27th Street, a 2,401 sq. ft. lot sold for $4,100,000
With the data above, the subject listing is clearly much larger by either double or 1,000 sq. ft. more than these 2015 sales. Does the size and timing command a 50% premium? Some might say yes, some might say no. But likely, you cannot fault the sellers for what seems to be a reasonable price.
Now if someone were to spend $3+ million ($400 per sq. ft. to construct…but likely much more) to build a home on busy Highland, do you think they could get $9 million for it? That is the tricky call.
1613 Highland Avenue Analysis
This lot was sold on the MLS just 17 months ago for $1,560,000. So in case you missed it, here is your second chance! Unfortunately, you will have to pay today’s $1,849,000 asking price, almost $300,000 more.
The only improvement to the property seems to be an investment in a set of plans by a local design firm. At 2,400 sq. ft. feet, those plans likely cost less than $25,000 if they were not taken through the approval process. Should this property command $225,000 more? Let’s see…
Here are the lot comps…
137 15th Street, a 1,347 sq. ft. lot (home in great condition) sold for $2,200,000 in 2018
129 15th Place, a 1,359 sq. ft. lot was sold for $2,050,000 in 2016
The true lot sale on 129 15th Place was sold by a Manhattan Pacific Realty agent to buyers that were planning to build a new construction home. At $2,050,000, this sale makes our subject listing asking $1.849 million look like a deal; however, you need that discount in price to account for busy Highland. It could be argued to the contrary that higher up on Highland provides for better the views.
Now let’s take a look at the existing comps on half lots…
228 5th Place, a 1,750 sq. ft. home sold for $2,370,000
133 15th Street, a 2,300 sq. ft. home sold for $3,075,000
216 9th Place, a 2,012 sq. ft. home sold for $3,599,000
1904 Ocean Drive, a 1,800 sq. ft. home sold for $3,250,000
Size-wise, the 15th Street comp makes sense but new construction on 216 9th Place (built on spec by yours truly) is the better comp because it shows buyers will pay a premium for new construction.
If one is assuming $400 per sq. ft. for the 2,000 sq. ft. above-grade build and $1,000 per sq. ft. for the 400 sq. ft. basement on this subject listing, then one can assume it would cost $1,200,000 to build on the property. That would put an owner all-in at around $3,050,000.
Not terrible! But would you rather own a smaller 216 9th Place with better views and a more peaceful street or go bigger with the option on 1613 Highland?
Per the comps, you are likely worth around $3,000,000 and can get your money back. And, just maybe that bigger square footage will overcome the Highland location and push you to $3,600,000 like the comp on 216 9th Place.
Neither property seems to be asking unreasonable prices per the data at hand. But man oh man, will prices keep going up? Not to mention construction prices were much more affordable a couple years back.
If you are a buyer planning to hold over the very long term, then these could be great options. If you are a short term buyer, then you have to think long and hard if you want to be the next one to try and push the market higher.