I have really enjoyed writing investment-themed blog posts for my readers this month. So, I wanted to continue the theme and share some great buys that have occurred this summer.
The average residential real estate buyer does not know how to properly underwrite a great deal.
Oftentimes, your typical buyer will purchase, hold onto their property, and then hope their house is worth far more the next time they call their agent.
I am going to break down some of the best deals in a few South Bay areas, so it can help in your search to know if you have yourself a great purchase.
Below are what I believe to be some of the best deals of the 2019 summer.
Redondo Beach Summer Deal
The Redondo Beach deal of the summer occurred with a single-family home sale in North Redondo in the Villas North sub-market.
- 2502 Graham Avenue
- 3 bed, 1.5 bath, 1,051 sq. ft., 7,500 sq. ft. lot
- Sold Price: $975,000
To the average buyer, this is an older home with tons of potential (or headache) and a HUGE backyard.
But, with the R-2 zoning, this house and lot is a future two-on-a-lot townhome site.
There were three new developments just a few blocks away on Voorhees Avenue with five of the six homes selling between $1.42 and $1.5 million. Take a look at the details of the three two-on-a-lot townhome sites below:
- 2311 Voorhees Avenue
- Unit A
- 3 bed, 3.5 bath, 2,200 sq. ft.
- Sold Price: $1,360,000
- Unit B
- 4 bed, 4.5 bath, 2,400 sq. ft.
- Sold Price: $1,420,000
- Unit A
- 2104 Voorhees Avenue
- Unit A
- 4 bed, 3.5 bath, 2,446 sq. ft.
- Sold Price: $1,485,000
- Unit B
- 4 bed, 3.5 bath, 2,446 sq. ft.
- Sold Price: $1,485,000
- Unit A
- 2309 Voorhees Avenue
- Unit A
- 4 bed, 3.5 bath, 2,400 sq. ft.
- Sold Price: $1,500,000
- Unit B
- 4 bed, 3.5 bath, 2,400 sq. ft.
- Sold Price: $1,500,000
- Unit A
If you assume the Graham Avenue property to fetch the low-end of the range of $1.425 million per townhome, and, a professional developer is able to build the home for $175/sq. ft. or $225/sq. ft. for a non-professional developer, the rough profits are as follows…
- $750,000 in profit for the professional developer
- $525,000 in profit for the non-professional developer
**These profit calculations are based upon throwing in 10 to 15% in soft costs and no debt/holding cost considerations.
There are plenty of developers that would take less than a $750,000 profit. What made this property such a good deal is that the listing was originally priced at $1.175 million with many market watchers thinking it would sell around $1.1 million.
Rather than cutting the price to show the market that they were negotiable, the Seller took a massive $200,000 discount after being on the market for less than two months. That huge discount (and shrewd purchase by the buyer) allowed this lot to sport juicy profit numbers as a development today or a great covered land play over the long-term.
For more on covered land plays, please check out my blog from last week here.
Palos Verdes Summer Deal
The Palos Verdes deal of the summer occurred with a single-family home sale in the unincorporated Westfield area known as the Palos Verdes Peninsula.
- 26819 Westvale Road
- 3 bed, 3 bath, 2,194 sq. ft., 25,703 sq. ft. lot
- Sold Price: $1,250,000
Most of my clients know that I am a big fan of unincorporated Palos Verdes because building codes are guided by the county of Los Angeles, which for lack of a better word are lax.
The key to this purchase is the extra-large lot that is over 25,000 square feet that would support a 3,500 square foot home or even double the size if you really wanted that large of a home thanks to Los Angeles County codes.
Back in 2016, the 2013-built 26954 Eastvale Road sold for $2.050 million and would almost assuredly get much more today. Also, another comparable at 26957 Bolan Lane sold last year for $2.163 million, which had a home size of almost 3,500 square feet on a lot that was only half the size of the property above.
A brand new construction home on this lot could probably command up to $2.4 million today and one would spend about $1.2 million in construction costs, which puts this great home with a pool right around lot value.
What’s more, this lot is perfect to take advantage of the state’s new Accessory Dwelling Unit law. See my past blog on ADUs for more information here.
For about $200,000, this property owner can put up a 2-bed/1-bath ADU in their backyard which would command about $2,500/month in rent. If you borrowed all of the money, it would take about $1,000/month of that rent to service the debt and you would put another $1,500/month in your pocket. So, with no money out of pocket, you can create an income stream that easily covers your property taxes on this great home/land investment.
Much like the Redondo Beach sale, this property started out asking $1.7 million. After cutting shortly to $1.5 million, the buyer came in swiftly with a $1.25 million low-ball offer and the Seller accepted the additional quarter of a million discount.
Another shrewd buyer and a great purchase on the Palos Verdes Hill.
Manhattan Beach Summer Deal
The Manhattan Beach deal of the summer occurred with a single-family/duplex sale in the Sand Section walkstreets.
- 220 16th Street
- 5 bed, 4 bath, 2,701 sq. ft.
- Sold Price: $5,150,000
My avid readers will know that I have written quite a bit about the 100- and 200-block walkstreets between 16th and 20th Street where developers have been making thin to no profits on their spec sales. See more about this topic on my June 2019 blog post here.
So, although the property values surrounding 220 16th Street are feeling some pricing pain, this property still looks to be a solid buy.
The bedroom and bathroom layout on the lower floor left something to be desired, but the top floors of this 2,700 square foot structure offered some of the best views of any walkstreet home in this neck of the woods. A back patio/pseudo-rooftop deck offered stunning views of the Manhattan Beach Pier, perfect for watching fireworks.
Below, is some of the proof of why I believe this was a great purchase.
- 132 17th Street
- 3 bed, 2 bath, 1,951 sq. ft.
- Sold Price: $5,500,000
This sale above closed a few days before 16th Street for $5.5 million. The property is closer to the water but is 750 square feet smaller with views that cannot compare.
From a pure existing comparable sales perspective, this 16th Street buyer found a $350,000 discount on a property that could be argued better and larger (to be fair, some would argue to the other side).
And from a land perspective, if you read my past blog on the walkstreets, then you will note the new construction spec sale that sold two doors down for $8.395 million.
- 212 16th Street
- 4 bed, 5 bath, 4,100 sq. ft.
- Sold Price: $8,395,000
The spec developer snagged this 212 16th Street lot back in 2016 for $4.535 million as a pure land play.
So to get 220 16th Street for only $5.15 million, you are picking up the property for lot value and only paying about $600,000 more for a 2,700 square foot building with amazing views…that is a pretty darn good deal in my book.
This purchase was as close to land value as you can get for a great building/views, and as a result, there is opportunity to develop the property if desired in the next cycle.
Conclusion
So, there you have it! This is just a sampling of some of the three best deals in the South Bay this summer.
If you noticed, all three properties were negotiated down by a huge discount from their original asking price and it was done early in the listing period.
Buyers found motivated Sellers and offered quickly with low-ball offers. They were rewarded with purchases that will almost certainly make them out-sized returns compared to most purchases in the area.
Summer is not over yet! Get out there, find motivated Sellers, and make low offers. You just might be surprised with the result.