Some day, I plan to wake up in the morning and spend many moments, perhaps hours even, not thinking about anything. I want to stir in my bed for some measurable amount of time without feeling any particular need to shower and shave and think. If that day ever comes I plan to recognize it, but today isn’t that day and so I’ll go about thinking about everything and anything, things I can change and control and things that I cannot. Today, like every day before it and most of the days after it, there is much work to be done. There is a house to build, one that keeps being built but never seems to be built. The house consumes me to a degree, and mixed with regular work and a magazine that must be cobbled together and published in the next 120 days, there’s a whole lot to think about.
The house. I’m building it from scratch for one very basic reason. Not because I need to see my vision executed, though there is some of that mixed in with my motivation, instead I mostly build this home because I know that in doing so I am achieving value. I know that I’m building a home and toiling in the process because once that home is completed I will have captured value and found immediate, substantive, equity. There would be no other reason for me to do this, as unless some of you email or call me today to buy or sell something, this brand new home will be sold in the future to gain access to that equity that required so much sweat and stress.
Value, that’s what I’m looking for in my life, and what I’m hoping for in yours, which is why construction is necessary. There are cottages being remodeled today in the Harvard Club, in fact, the last three properties that I have sold in there are all in some stage of renovation. The reason for this? Not because of some insatiable desire by the new owners to pick out colors and strain over tile samples, but instead it’s happening because these buyers turned owners have discovered value that cannot be found elsewhere. Value is only fun if it’s comfortable, and so a renovation is a necessary cog in this pleasure wheel that we try to keep rolling forward.
There were two sales this week on Geneva Lake. Two sale at two ends of our spectrum. One nearest the Linn Pier boat launch that sold for $850k. To all those out there that now think $850k is the point of entry on Geneva I can pour many buckets of icy water over that new enthusiasm because $850k isn’t a realistic entry point. It’s realistic if you don’t mind waking up at 4 am most summer mornings to the sound and smell of a 2 stroke outboard being cranked, and the shouts of fishermen as they embark on a very early morning of fishing. It’s realistic if you don’t mind parking lots as neighbors. In other words, it isn’t realistic. The sale is fine for the market as it removes a low priced property from the inventory, but aside from that it means very little because the property was so terribly compromised.
The other sale was on Maple Lane, at $2.68MM. The ask on that property was most recently $2.799MM, so the win here is for the seller and not so much for the buyer. Why is that? Well, for starters the list to sale was pretty tight, so that’s always going to be a disappointment for the buying side. But mostly the win is for the seller because this home had 90′ of frontage on Maple Lane and the home needed at least some measure of renovation. So if there’s a $2.68MM entry point and a renovation required, perhaps it isn’t out of line to suggest that a new owner might find a way to be all-in for $3MM, and that’s assuming that there isn’t a tear down on the horizon (all speculation on my point as I represented neither buyer nor seller, and for that my children have stayed home from school today to mourn).
So, is $2.68MM a good idea relative to other inventory? Taking personal preference out of the mix, though that is the most important ingredient to any sale, it seems obvious to me that to have purchased Folly Lane for $1.899MM would have been a much, much better approach to value. Folly Lane, my lovely little listing there, is back on the market. There was a deal last fall that fell though, and then a deal that I put together around Christmas that also just fell through. The property is now, through no fault of its own, back on the market. Now, let’s assume that this home, while suitable and swelled with 7 bedrooms, will be torn down by a new buyer. I think it should be remodeled to the tune of $200k and lived with for the foreseeable future, but let’s say it will be torn down by 7 out of 10 buyers. Commence the demolition.
Since I’m building now I can tell you very clearly what construction costs are. While I’m building for less than you might, it’s safe to say that $250 per square foot will build someone a very nice lake home. We’ll call this house a 4500 square foot structure, with cedar shingled roof and a nice gray shingled siding, a Viking range, the mandatory Sub Zero refrigerator, and two masonry fireplaces for wintertime enjoyment. That house, by my math, will cost around $1.125. Let’s round up to $1.3. The math now tells us that we’ll be all in for Folly around $3MM- in a brand new, high end home, with 100′ of frontage, a beautiful pier, 1.7 acres of wooded land and a Snake Road entrance. Oh, and your new lakefront manse is two doors West of Pat Ryan’s House in the Woods, and two doors East from the Folly listing that sold for $7.1MM last summer. Value secure? Um, check.
So where would you rather be? In what scenario would you feel the most secure? $3MM or so in an older home on Maple Lane off of Linn Pier Road with a relative tunnel view, or $3MM or so in a brand new home off Snake Road with views to the South, East, and West, flanked by properties worth many times more than yours? I agree. It’s a stupid question. Folly Lane is available, and it’s available like right the heck now. If value is the goal, there’s no better example of it available on the lakefront today. (Folly Lane, $1.899MM, pictured above.)