Although many home prices may seem high in Montecito, but one must first consider the area and compare to places like Beverly Hills and Brentwood (meaning top home price areas in the nation), In some instances and sometimes most important in determineing value for a home can be the cost to reproduce.
Since there are so few empty lots to develop in Montecito, It is generally considered normal practice for an older home to be purchased and remodeled or replaced with a larger home or estate. This means that the entry level for doing a development project in Montecito means likely buying an otherwise liveable home and starting there.
Buying an existing older or smaller home puts developers in competition with home purchasers who are looking to get into the area at a lower price point and then do some work to improve an existing home. The developer is also competing with other area residents who invest in local Real Estate as side ventures and those from out of town looking for 2nd homes (more than half of Sheela’s business last year was 2nd home purchases)…
Essentially, there is a lot to consider before diving right into a building development project in Montecito. With many homes in most every price range listed near, at or below a cost to reproduce, it is essentially these homes would seem to be good values or opportunities all things considered.
It goes without saying that obtaining a top lot in Montecito with views or a private sanctuary location, and then building a dream home can be profitable as well as satisfying, but when considering prices out there for many homes on the market, and comparing to cost to reproduce, it might just be a good decision to pick from what’s out there on the market and save the 2+ year headache of building.
Here are a number of good comparison properties, that point out value when considering cost to reproduce.
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1081 Alston Road – listed with an agent in our company, offers a Gated Grand Estate Entrance with motor court, a two commanding story residence with 5 bedrooms and 5.5 bathrooms, gently sloping, grassy and landscaped yard with ocean views and a swimming pool . The home is listed for sale at $4,995,000.
If you were to find a lot like this, get plans and build a new home, it might go something like this, and be spread out over 2-3 years or more depending on approvals and processes.
Replacement or reproduction cost would be (assuming local area norms), consider only as educated estimates…
$500 per sqft construction in 4,550 square feet – $2,275,000
Architectural and engineering $150,000
Planning, holding costs for lot for 3 years $100,000
Landscaping and hardscape, pool, etc… $275,000
Purchase of nearly one ocean view acre in Montecito $1,800,000 (conservative)
Total rough estimate to replace/reproduce $4,600,000 – not to mention 3 years of living somewhere else while you plan and build the home from scratch.
2775 East Valley Road listed by another agent and company at $2,795,000
This spanish home is over 3,700 square feet on a prime acre in East Montecito. The home is set back and separated from the street by a long, landscaped driveway and private tennis court. Assuming we were to reproduce this house the costs might be something like this:
$400 per sqft x 3,700 square feet, construction $1,480,000
Architectural and permits $100,000
Planning and holding costs $50,000
Landscape, tennis court, driveway $250,000
Lot value – i level acre in East Montecito $1,400,000
Total rough estimate to replace/reproduce is about $3,250,000.
130 Hermosillo Road is listed at $1,839,000
This bay area feeling contemporary home is just one half block from the shopping and dining on Coast Village Road yet on a quieter street in the Cold Springs School District. Enjoy 3 bedrooms and 3 baths in this lower priced for the area home. Did I mention the swimming pool? This seems to be a nice home for a solid price when considering cost to replace/reproduce>
$400 per sqft construction @ 2,400 square feet $960,000
Architectural / permits, etc… $75,000
Holding costs on lot, etc… $50,000
Landscape, pool, driveway $200,000
Lot value on Hermosillo $975,000
Total rough estimate to reproduce/replace is about $2,250,000
All this tells me that many homes on the market are, or seem to be good values based on what an appraisal might consider the cost to replace and reproduce. Loans to value are often based on these types of evaluations and appraisals, and if one can obtain a solid loan rate on a well priced property, the higher prices of Montecito and other Southern California enclaves start to seem like bargains:-)
Mark firstname.lastname@example.org – www.MontecitoBestBuys.com