North Beach Real Estate 101

North Beach and Carlouel

How to Find Hidden Value

I will focus only on Carlouel and North Beach Real Estate in this letter because I do not live in the other areas.

Value based on Geography

For North Beach and Carlouel the values of the LAND follows these general rules:

  • Real Estate Property values (from the little circle) increase as you go north;
  • Real Estate values also increase the closer you get to the Gulf of Mexico;
  • Water view even a small sliver tends to drive up the price as well (although usually  between $20K - 50K per lot for a partial view);
  • Waterfront property is significantly higher priced than the property that does not have waterfront near it;
  • The Gulf of Mexico waterfront property is significantly more that bayside property;
  • There is an island of reduced value property around 880 Mandalay as it reduces the privacy and is not particularly attractive;
  • Carlouel Real Estate is usually higher in value because the neighborhood has several advantages:
    • The ratio of Owner Occupied to Rental is much higher
    • The Beach Access is gated for the community, so there is no public access to the beach:
      • People do not park in the neighborhood to go to the beach
      • Less traffic

North Clearwater Beach

North is to the left of the Picture and the Gulf is towards the bottom of the picture. Blue dot is locating 1040 Mandalay Avenue.

So, the farther left and down the picture the higher; the more valuable the property.

What’s that smell?

There are also a few homes that are located next to a drainage pump which tend to seem like a good bargain until you live there and find out that they smell extremely bad 60-90 days a year. You can recognize these properties, because they tend to turnover often. I recommend that you look around the property to see if there are any sewers to the Bay or pumping stations near the house you want to buy.

Lot Size versus Buildable Space

Often people compare lot size of properties as if the lot size was the same as buildable size. However, the same lot size if it is a corner lot would have significantly less billable space that a lot in the middle of the block. This is because the setbacks are more on a corner lot. Developers often offset this by making corner lots larger. Usually the buildable space is the same, but they sell the feature of a corner lot as more spacious.

So, if the buildable space is already taken up by the existing build, additional square feet have to come from building up. The challenge then is if you build over current square feet it will take you years to complete this as significantly more money per square foot. Sometimes you can over the garage for less. Some people have even closed of the garage and converted it to living space. This leads me to the final point. It is about cost per square foot.

Cost per Square Foot

Even a professional appraiser can make mistakes with consistent-use theory. ……Another appraiser low-balled the value of a site by using the current property use instead of the potential highest and best use.[i]

Another example is for an appraiser to assume that the increment cost of adding square feet is equal to the average cost per square feet. While this may be true when comparing similar lot sizes, it is usually unacceptable to compare single lots to a double lot if the buildable land already has reached the limit for the single lot. In order, to do a fair comparison, you would have to calculate the cost of building up instead of out. Building up is significantly more expensive than building out. In general, the hidden costs are significant. Here are the examples of the incremental cost:

Cost of adding additional square feet by type of construction:

  • Under an existing roof: $120 to $125 per sq. ft.
  • Bump out with additional roof $225 to $300 per sq. ft.
  • New Construction (Building Up) 1st Story $350 to $500 per sq. ft.
  • New Construction (Building Up) 2nd Story $225 to $500 per sq. ft. (Assuming 1st story is built to support the weight of 2nd story).

You might wonder why it is so, much more for new construction. That is because, you have to build the infrastructure (Pylons, etc.) before you can build the first floor.

All of this was in preparation for sharing the comps.

[i] Reference http://homeguides.sfgate.com/consistentuse-theory-real-estate-appraisal-77796.html

 

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