This is one of a handful of vacant lots that have sold in Montauk for more than $1 million in recent years. It is an excellent lot on the misnamed Lake Montauk, which was the largest freshwater lake on Long Island until Carl Fisher, who attempted to develop Montauk into the “Miami of the North” opened the northern side of the lake to the bay and turned it into a harbor in the 1920s.
The entrance to Lake Montauk, where Gosman’s Dock and other attractions are located, is now the center of the commercial and sportfishing industries in Montauk. This lot is on East Lake Drive, which runs along the eastern shore, and faces west over the water, offering sunset views. The lot is .8 acre and is rectangular, sloping gently up away from the water.
There is a building envelope on the lot which is far enough away from the water so that discretionary zoning permits are not required to build. This is a critical valuation factor, as many of the vacant lots left in Montauk are heavily impacted by wetlands and require extensive permitting work.
This particular lot—one of the best in Montauk—offers a window into the appreciation of real estate in the hamlet over the last few decades. It was purchased in 1985 for $220,000. This sale, 26 years later, represents a compounded annual rate of return of slightly over 7 percent.
This house is located in a small and somewhat obscure neighborhood on the Napeague Stretch, which runs between the eastern end of Amagansett and the uplands of Montauk near the Lobster Roll restaurant. The neighborhood consists of a handful of streets between the highway and the ocean, with one-quarter acre or smaller lots and a handful of larger lots directly on the ocean.
There are strong positives and negatives associated with this neighborhood.
On the negative side, it is far from all the stores, restaurants and other attractions in both Montauk and Amagansett. Additionally, highway noise is audible throughout and the highway can be seen from many of the houses. But on the positive side, the neighborhood offers a relatively inexpensive way to purchase a house very close to an ocean beach.
This 2,000-square-foot house, located on a .17-acre lot, was built in 2008 and has 4 bedrooms and 3½ baths. Like many homes in beach communities, it is “upside down” with the common areas upstairs, to take advantage of ocean breezes and views. A second floor deck off the living/dining/kitchen area extends the upstairs living space.
The seller purchased this lot as vacant land in 2005 for $525,000. Following that time, property values in the Hamptons inflated rapidly up to their 2007 highs and then deflated just as quickly, down to their 2009 lows.
Today values in many neighborhoods have stabilized at approximately 2005 levels. And this lot, if vacant today, would likely still be worth around $525,000.
Assuming a cost of $325 per square foot to construct this house, which is approximately the cost for ordinary construction, it appears that the seller’s all-in costs were on the order of $1.2 million. The sale of this house represents a gross profit of around $250,000, not accounting for taxes, insurance, maintenance and other carrying and transaction costs.
27east on Aug 22, 2011