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| Best Practices: Property |
Compound Interest
Elizabeth Wine
06/01/2005
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Peter Turino, principal
broker at Brown Harris Stevens in the Hamptons, says the tactic of buying a lot
near or adjacent to your home and creating a compound has become popular in
recent years. “The multidwelling compound is often worth more than the sum of
its parts. It’s a good real estate strategy, because you’re enhancing the value
of the property you own already,” he explains. “It’s also a nice defensive move,
protecting yourself from someone else building next door.”
Owners of two
combined properties in the Hamptons, he explains, can often sell their compound
for anywhere from 150 to 300 percent of their original, separate sales prices.
“A lot of the big players, as soon as they buy one property they are
already looking to buy the adjacent property,” Turino adds.
The crunch in the
Hamptons is mirrored in other exclusive regions of the country. As many
desirable communities are becoming more popular, neighborhoods are cracking down
on overbuilding. Zoning despots are placing strict limits on the number of
stories per house, on the number of structures on a piece of property and on
their use. In many communities, for example, it is unlawful to rent out a
poolhouse or guesthouse. Because so many homeowners succumb to these rules and
regulations, abandoning their plans, those who fight through the red tape to
build a guesthouse can improve property values to a surprising degree.
Residential Dilemma
Shauna and Barry Montgomery are old hands when it
comes to building guesthouses amid arduous zoning issues, having constructed one
with an additional garage at their vacation home in Loblolly, Fla., and another
on Lake Geneva, Wis. The couple, whose primary residence is in Chicago, have
since sold both vacation properties, and are building another vacation home in a
different municipality on Lake Geneva. With each construction project, they have
been forced to navigate different types of zoning restrictions.
The first
Lake Geneva municipality, Fontana, required setbacks of at least 75 feet from
the water, special permission to install a pier, connections to access roads,
fire hydrants, soil erosion permits and other vagaries. While the couple toed
the line on these regulations, one they simply ignored: that second houses can
only be constructed as servants’ quarters. This anachronism remains from the
turn of the last century, when wealthy Chicago businessmen flocked to holiday in
the area with their large household and domestic staffs in tow.
TOP VIEW
Building a guest house is becoming a popular strategy for increasing both the
aesthetic appeal and overall value of residential property. But owners must
beware of meticulous construction regulations and environmental rules that can
drive up building costs and mire projects for years. |
Despite all
the restrictions, Barry Montgomery says that building the five-bedroom,
3,500-square-foot house was worth the aggravation, both to enable his extended
family to visit in comfort and to pad his bottom line. “It certainly made the
property more valuable,” he points out.
At their second Lake Geneva home, in
Linn Township, none of those regulations is at issue. The couple simply cannot
build a guesthouse. The local zoning rules limit the number of structures
available for use on a particular lot, according to John Engerman, the
Montgomery’s builder. In other residential hot spots, the story is much the
same.
Suzanne Frisbie, a real estate broker at Corcoran in Palm Beach, says
that after owners negotiate the local zoning maze, guesthouses can add
tremendously to a property’s aesthetics. “Any time you can create spaces in your
togetherness, it tends to make for a greater sense of happiness. The guest’s
freedom to come and go and not be under your feet is a tremendous treat to
be able to offer your friends,” she says. Of course, in locales such as South
Florida, it follows that a guesthouse should be nearly as well-planned and
well-appointed as the main residence. Palm Beach’s newest high-end guesthouses
are marked primarily by more luxury. Bathrooms are bigger and more sumptuous.
Marble abounds. Frank Symons, executive vice president at Sotheby’s
International Realty in Beverly Hills, agrees that lavishness is in on his coast
as well.
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