Jan 16, 2012 12:14 PM
74 Tern Drive Montauk $589,000
This house is located in the Culloden neighborhood of Montauk, near the docks that are the base of Montauk’s charter and commercial fishing fleet.
The neighborhood is named after the H.M.S. Culloden—a British ship that ran aground after striking an undersea boulder during the Revolutionary War. The crew was saved, the cargo was salvaged over a period of months, and the ship was burned to the waterline to prevent it from falling into enemy hands. Today, the Culloden neighborhood is full of small beach cottages on compact lots within walking distance of the bay beach and the shops and restaurants near the docks.
This property is only .17 acre, with a 2,000-square-foot ranch house. The house is well kept but ordinary, with T-111 siding (similar to plywood), an asphalt roof, three small bedrooms, three baths, a one-space garage, and an open kitchen/living/dining area.
The sellers purchased this home for $161,000 in 1995. This sale represents a very nice 9-percent annual return.
For some time now there has been a great deal of interest in starter homes in Montauk, with many young people attracted to the area’s good surfing and nightlife. As a result, the “low-end” homes in Montauk are quite expensive compared to many north-of-the-highway neighborhoods throughout the remainder of the South Fork.
18 Bull Run Unincorporated East Hampton $950,000 (Vacant)
This 2.3-acre vacant lot is located in the Northwest Woods area of East Hampton between the East Hampton and Sag Harbor village centers. It is on one of the best streets in Northwest, Bull Run, which is a quiet cul-de-sac with large parcels and attractive homes in a convenient location not too far north of East Hampton.
This part of the near Northwest was hot during the credit bubble, and the dot-com bubble before that, as it offered large, private building sites fairly close to town at a giant discount relative to much pricier south-of-the-highway lots. Many of the land transactions in Northwest during the 10-year period prior to the market top in 2007 were either flips or speculative build-outs. But either way, they were fueled by enormously rapid appreciations in value.
Since 2008, however, there has been little building in this neighborhood and only a handful of land sales. Most post-crash buyers in Northwest are content to pick from one of the available homes, at historically low interest rates, rather than buying land (which generally requires cash) and going through the building process.
This lot was sold in 1997, during a rising market early in the dot-com era, for $185,000. The next year, it was flipped for $230,000, a cool 25-percent, one-year profit. Three years later, in 2001, it was flipped again, to the current seller, for $500,000, for a 30-percent compounded annual return.
Had this seller unloaded in 2006, the result might have been the same. In fact, it was listed originally in 2005, and then re-listed in 2006, but didn’t sell when the market was hot, perhaps because it was overpriced.
This sale represents a perfectly respectable 6.6-percent annual return for the seller. The sale looks to be ahead of inflation, ahead of current bond rates and roughly in line with national housing over the same period, though nothing like the heady days of the last two bubbles.
