In certain price ranges here for certain sorts of properties, the buyer doesn’t need to possess any real vision. Chances are, if you’d like a nice enough home for around $600k in Country Club Estates, the vision of someone else will suit you just fine. There’s no need to be creative, if that’s your goal and that’s your financial capability. Likewise, if you’d like to bite off a large lakefront estate, and it’s already rather perfect, you needn’t bring much forward thinking to the table. You can simply agree that the current owner’s vision matches yours, and you can be happy that he did the work already so that you don’t have to.
While these two examples are fine, and all, they are obviously cherry picked scenarios. Most of this market requires ample vision, and unfortunately for most, vision is not as common as we’d all like it to be. If we’re looking for a lakefront home, and we’d like to spend $1.75MM, but we can spend $2MM- maybe $2.2MM- we could really use some vision. Times were, back in those darker years of 2010, 2011, and even into 2012, we didn’t need much vision at all. We could look to the past for our clues, and if the rear view mirror showed a much higher peak value, we’d be fine to focus on that and buy without much concern for what came next.
The problem in this particular price range, as I see it today, is that without vision, buyers become followers. Much like the one eyed man leading the blind, this current lakefront scenario shows a seller with vision leading buyers who lack it. If you think this is being done out of some civic duty, some community service, you’d be sorely mistaken. This is a profit play, as most vision tends to be. This is about buying and remodeling entry level lakefront homes, and this is about a trend on Geneva Lake.
If you’re a buyer here, for around two million dollars, the sad truth is that I can’t sell you any private lakefront that is remarkable. I might be able to find you a decent piece of property, with a lame house, or a lame property with a decent house, but there’s usually something lame about what you’re buying. Sweet house, decent lot, super sweet giant municipal boat launch as a neighbor! I’ve been rather clear over these many years, and it’s no secret that I’d prefer to buy location first and figure everything out second. I’d find a spot that holds easy value, and I wouldn’t immediately care about the lack of running water.
Unfortunately, my angle is a rare one. The proof? Buyer’s have been showing a willingness to reward others for their work in a way that this lake isn’t entirely used to. I’ve sold plenty of lakefront homes where the sellers are simply trying to get all, or most, of their overall investment back. Buyers understand this, and if a buyer sees current market value in a break even seller number, then we can expect a sale. But buyers have been shy about providing a premium for other peoples work, until recently.
Case in point is a home on Oak Birch in Williams Bay that just sold for $2.11MM and change. It was a nice house, a remodeled house, that sold last summer for $1.375MM to the developer who spun it these many months and many improvements later. The finishes were nice but not opulent, the style welcome but not necessarily significant. So why does a property sell for this much money when buyers understand there is a mark up on the finished product? Well, that’s because buyers recognize their unwillingness to tackle renovation projects, and they find it reasonable enough to buy a vision that’s already been presented to their present.
If I were a buyer, I’d take clues from this developer’s success. I’d consider lakefront homes in the $1.3-$1.9MM range, and I’d do my best to conjure my own brand of vision. I’d seek value, and I’d hire a contractor and I’d see the work through to its completion. If I bought a house for $1.9MM and put $600k into it in order to have a home with a market value of $2.5MM, this isn’t what I’m talking about. I’m talking about buying a home for $1.6MM, putting $400k into it, and having a home that’s valued at $2.3MM+. I’m talking about creating margin, as there is no finer reward for vision than immediate, lasting equity.