This Amagansett Spec project crossed our desk a few months back.
We were approached by an entry level developer who asked for our expert opinion, and wanted us to create an Executive Summary Proposal to share with his investor network and banking sources.
The property is within steps of the Bay on a quiet street. It’s ideal for a young family interested in the Amagansett School District, walking to their own private beach for swimming, kayaking/sailing, SUP, and clamming.
The land cost is only $550K, and because of the pre-existing site work the budget for a 2200/2500 SF house was only $650k. The landscape budget would be nominal because the property is mostly sand-based. Perhaps beach/African grasses and a few Cryptomeria (or assorted pine trees) and some lavender & hydrangea is all you need.
We estimated an all in project cost of $1.250M. We determined the estimated end value for a quick re-sale was between $1.695M and $1.850M. We based this on area comps and it being new construction. Having an open floor plan with 4 Bedrooms 3 baths, a roof deck that included a fireplace, and a seating area with water views. We recommended a well thought modular designed home to curb costs and speed up the process. We suggested the builder not be greedy, and establish an end price point of $1.79M so that the project’s start to finish was no more than 12 months.
This particular developer didn’t think the profit spread was rich enough, and got cold feet. Mathematically, the potential profits were commensurate with his experience, but his personal “gut feeling” about market uncertainty and neighborhood concerns made him overthink the venture.
Sometimes it only takes one nearby rehab project to change the character of an entire neighborhood. Since this time, as we anticipated, the area has improved. In this case three neighboring properties have seen significant changes. If market trend continues and the popularity for the Amagansett School district remains in tact, then the end value would be on the closer end of $1.895M.
We still think this is one of the smartest development projects in Amagansett today.