A few words about valuing Big Water lake frontage:
Perhaps the overriding factor is lake size.
Huge water = huge prices for the underlying lot, generally.
Put a different way, the larger and more desirable the lake a property is fronted by, the more the property costs per foot of frontage. And if it's part of a lake chain as well, it's even more of a factor. Level sand frontage and lack of inconvenient site elevation increase the value. So does the existence of a top flight building site that's perfect for a walkout basement. Top quality vacant lots on Big Water are becoming scarce.
Prices can seem pretty crazy. On the other hand, this sort of lot is likely to appreciate in value faster than other kinds of lake frontage, making it potentially a good buy.
For example, there were two Fence Lake vacant lots put up for sale in 2002, both roughly one acre in size. The first was a level, sandy, 103' frontage lot near the Fence Lake Lodge. It sold recently for $275,000. The second, listed very recently, features steep elevation and is inconveniently located in an "outlet" access is by unmaintained, dirt road. Its asking price is roughly $160,000.
Since vacant lots on Fence Lake are scarce, what good does this knowledge do? It helps explain and account for the pricing of existing Fence Lake homes and cottages.
Let's take a recent Hunter Realty (now RE/MAX First) listing as an example. What was listed was an older, nonconforming, 965 sq ft year round cottage. It's nonconforming because it's less than 75' from the water's edge a requirement for new construction. It's not pretty from the outside - painted yellow, with a flat roof - but has its charms inside, including a breathtaking lake view. The property has moderate elevation, and faces west. Its western view of Fence Lake is second to none. It's approximately 1 acre in size and has 100' of frontage. Based on the pricing for the last two most recently offered lots, we can split the difference: level lot @$275,000; steep elevation lot @ $155,000, moderate elevation lot at ~$215,000. Let's add a bit for the perfect walkout building site and landscaping, say $15,000. So, we estimate the current market value of the moderate elevation lot at $230,000.
What do we know about the history of lots like this? They appreciate at between 5 and 12 percent a year, and sometimes as much as 15 percent. What's the value of this lot going to be in 5 years, using a conservative 7 percent annual increase factor? The compound rate of return is over 41 percent, yielding a projected 2007 value of roughly $325,000. What happens if we use a 10 percent annual increase as a factor? The compound rate of growth is nearly 65 percent, yielding a 2007 projected value of roughly $380,000. Probably a good investment, all other things being equal.
What else is on the lot? Well, there's the cottage but let's leave that out, for now. There's a new, 3-bay garage that accommodates living quarters above. It has hydronic pipes installed. A conservative estimate of the value of the garage as is? $30,000, in my opinion. So now we can value the lot and garage at $260,000. What else is there? A pier, and an older boat house. Boathouses are not replaceable given current restrictions. Then there's the nicely done rip rap and pier. Let's add another $5,000. Now the lot (which, by the way, percs for a 4 bedroom conventional septic) and the improvements we've counted in are market valued at roughly $265,000. What's the current asking price? $278,700, including lot, cottage, garage, boat house, pier, appliances, a wood stove, etc. Therefore we can estimate that the cottage accounts for roughly $14,000 of the asking price. Is the cottage worth $14,000 to you, as a prospective buyer? The fact that it serves as a year round home for the current owner argues in its favor, but only you can answer the question for yourself.
If you want a year round, westward facing place on Fence Lake for under $490,000 - the next least expensive, available, year round Fence Lake residence - and you'd rather skip the steep elevation lot, this is all there is as of now. Will there be more choices next year? Maybe - but they'll cost more than they would have this year. Should you buy the property if you're eventually going to tear down the cottage and build a new home? I can't answer that question for you but maybe you can, after weighing the factors discussed here.
Perhaps the overriding factor is lake size.
Huge water = huge prices for the underlying lot, generally.
Put a different way, the larger and more desirable the lake a property is fronted by, the more the property costs per foot of frontage. And if it's part of a lake chain as well, it's even more of a factor. Level sand frontage and lack of inconvenient site elevation increase the value. So does the existence of a top flight building site that's perfect for a walkout basement. Top quality vacant lots on Big Water are becoming scarce.
Prices can seem pretty crazy. On the other hand, this sort of lot is likely to appreciate in value faster than other kinds of lake frontage, making it potentially a good buy.
For example, there were two Fence Lake vacant lots put up for sale in 2002, both roughly one acre in size. The first was a level, sandy, 103' frontage lot near the Fence Lake Lodge. It sold recently for $275,000. The second, listed very recently, features steep elevation and is inconveniently located in an "outlet" access is by unmaintained, dirt road. Its asking price is roughly $160,000.
Since vacant lots on Fence Lake are scarce, what good does this knowledge do? It helps explain and account for the pricing of existing Fence Lake homes and cottages.
Let's take a recent Hunter Realty (now RE/MAX First) listing as an example. What was listed was an older, nonconforming, 965 sq ft year round cottage. It's nonconforming because it's less than 75' from the water's edge a requirement for new construction. It's not pretty from the outside - painted yellow, with a flat roof - but has its charms inside, including a breathtaking lake view. The property has moderate elevation, and faces west. Its western view of Fence Lake is second to none. It's approximately 1 acre in size and has 100' of frontage. Based on the pricing for the last two most recently offered lots, we can split the difference: level lot @$275,000; steep elevation lot @ $155,000, moderate elevation lot at ~$215,000. Let's add a bit for the perfect walkout building site and landscaping, say $15,000. So, we estimate the current market value of the moderate elevation lot at $230,000.
What do we know about the history of lots like this? They appreciate at between 5 and 12 percent a year, and sometimes as much as 15 percent. What's the value of this lot going to be in 5 years, using a conservative 7 percent annual increase factor? The compound rate of return is over 41 percent, yielding a projected 2007 value of roughly $325,000. What happens if we use a 10 percent annual increase as a factor? The compound rate of growth is nearly 65 percent, yielding a 2007 projected value of roughly $380,000. Probably a good investment, all other things being equal.
What else is on the lot? Well, there's the cottage but let's leave that out, for now. There's a new, 3-bay garage that accommodates living quarters above. It has hydronic pipes installed. A conservative estimate of the value of the garage as is? $30,000, in my opinion. So now we can value the lot and garage at $260,000. What else is there? A pier, and an older boat house. Boathouses are not replaceable given current restrictions. Then there's the nicely done rip rap and pier. Let's add another $5,000. Now the lot (which, by the way, percs for a 4 bedroom conventional septic) and the improvements we've counted in are market valued at roughly $265,000. What's the current asking price? $278,700, including lot, cottage, garage, boat house, pier, appliances, a wood stove, etc. Therefore we can estimate that the cottage accounts for roughly $14,000 of the asking price. Is the cottage worth $14,000 to you, as a prospective buyer? The fact that it serves as a year round home for the current owner argues in its favor, but only you can answer the question for yourself.
If you want a year round, westward facing place on Fence Lake for under $490,000 - the next least expensive, available, year round Fence Lake residence - and you'd rather skip the steep elevation lot, this is all there is as of now. Will there be more choices next year? Maybe - but they'll cost more than they would have this year. Should you buy the property if you're eventually going to tear down the cottage and build a new home? I can't answer that question for you but maybe you can, after weighing the factors discussed here.
