Land Purchases Have Pluses for All Types of Buyers and Investors

There are a few times when a high-net-worth buyer might consider purchasing land instead of a finished home.

The first is when they want something truly unique. A land purchase, whether it’s a private island or an off-the-grid ski property, can offer that perfect, one-in-a-million location on which to build a vacation home that’s fit to be passed down through generations.

High-net-worth buyers might also consider a land purchase when they can’t find a primary residence that offers everything they’re looking for.

"People at this caliber are very picky and have very specific needs," said Santiago Arana, a partner at Los Angeles-based firm The Agency. "While many of them prefer to buy a finished house, some don’t find what they’re looking for—especially when the inventory is so low at the high-end of the market."

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And if they can’t find what they want, the other option is to purchase a teardown or purchase land where they can build their dream home from scratch, he said.

And then there are investors, who might look to purchase undeveloped land if they want to build a spec home, or pick up a larger plot with multiple parcels that they can develop with partners for a greater potential profit.

In each of these cases—and in any property purchase, Mr. Arana said—location is the single most important factor. From there, finding a piece of land that’s big and flat, which makes it easier and far less expensive to build on, should be at the top of any land buyers wish list.

With those factors covered, deciding whether a land purchase makes sense often comes down to lifestyle considerations for people who want to build a vacation home; budget and timeline for people considering building a primary residence; and the likelihood of making a profit for investors.

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Land for a vacation home means finding an unparalleled location

Buying land to build a vacation home gives the purchaser the opportunity to find exactly what they’re looking for, whether that’s complete privacy, jaw-dropping views, an expansive footprint to build on, or all the above, as the 425-acre Aspen plot of land that Douglas Elliman agent Max Taam is selling (for $30.845 million), offers.

Set on the backside of Aspen Mountain, this massive property is available for the first time since the Aspen Mountain Gondola opened in 1986. "You’d basically own your own private ski area if you purchased this land," said Mr. Taam, noting that Aspen Mountain Powder Tours currently operates private snowcat skiing in the area. Or just a piece of it, as the property can be sold in its entirety, or in smaller pieces, as it’s split into eight parcels that are between 23 and 160 acres large.

"This is likely to be someone’s second Aspen property," said Mr. Taam, noting that most interested buyers already have a 10,000- to- 15,000-square-foot home on nearby Red Mountain, or a nice penthouse in downtown Aspen.

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"While it’s a challenging process to build back there, it’s also more rewarding and will result in a property to pass down through generations," Mr. Taam said.

Another property that would offer views and privacy on a huge plot of land is in Carmel Valley in Monterey County—recently popularized as the setting of HBO’s "Big Little Lies"—where Douglas Elliman’s chief operating officer in California, Peter Loewy, is working with agent Christine Handel to sell 104 acres for $1.759 million.

Located in a gated development called Quintana Ranches, where there are 13 total lots just 10 minutes from shops and other amenities in Carmel-by-the-Sea, this relatively flat piece of land has views of the Pacific Ocean to the west—rare for a mid-valley plot—and the Santa Lucia mountains to the south and east.

"You’re away from all the congestion," Ms. Handel said, "but still close enough that you can quickly get to Carmel if you want to be there."

You’re also away from the permitting issues that are common in the city, so that you have the flexibility to pretty much do what you want with the land, which is approved for two building sites—likely a large house with either a guest house or horse barn, as the area is very equestrian driven—or even a small vineyard. It’s considered a bonus that Mr. Loewy already started working on the site’s infrastructure, putting in wells and tanks and starting an application for solar. "There are a lot of different avenues you can take with this property," Ms. Handel said.

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Buyers hoping to build their primary residence are looking for the best land for their dream home

When Mr. Arana is working with L.A.-based buyers who are considering purchasing either a finished home or land on which to build their dream property, he said he always offers the same advice: If they find a finished home that they like—even if they have to pay a premium for it, and it’s not 100% perfect—they should just buy it, he said.

That’s because as a spec builder himself, he knows how long it can take to build a home from scratch and how expensive it can be to get it right. For instance, he said, once someone buys land and goes through the process of hiring an architect, designer and builder, they’ve already lost one year. Then they have to get building permits and adhere to city building regulations, which are confusing and ever-changing, at least in L.A. Then they still have to build their home. "If you don’t know what you’re doing," he said, "by the time you have the house, you probably won’t have the same needs anymore."

However, if someone has the budget and the time and is truly unable to find what they’re looking for, purchasing land can offer them the chance to build a home they love completely.

Mr. Arana said he’s currently selling two plots of land on lower Tigertail Road—"probably the best street in Brentwood," he said—that’s a combined 3.4 acres, about an acre of it flat. "This is a premier, premier property," he said, "because you have the privacy, the location, the views, and a good amount of flat land. That’s as good as it gets."

Listed for $22 million, Mr. Arana said he already has multiple offers from end-users who could potentially build "the best house west of the 405 [highway]," as well as developers who want to build two spec homes and sell them for a profit. "The sky is the limit," he said.

He’s also selling two lots in Pacific Palisades, both with expansive Pacific Ocean views, which have already gone through the long and complicated building approvals process, he said. This means that a buyer for the $19 million and $17 million plots, whether they’re an end-user or developer, could save many months of frustration and start building right away, likely at a cost of $900 to $1,000 per square foot, Mr. Arana said.

For investment-driven land purchases, consider the bottom line

Next door to the Brentwood land he’s currently selling, on a plot with far less stunning views, Mr. Arana said he also recently bought land and built a spec home for $1,000 per square feet, which he sold a few months ago for $23 million, or about $1,600 per square foot.

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This is the type of project that developers are looking for right now, he said, noting that he thinks a house on the Pacific Palisades land will sell for $35 million to $40 million.

Across the country on New York’s Long Island, midway between Manhattan and the Hamptons, is another interesting plot of land that’s getting a lot of developer interest.

While this 27.63-acre plot in Northport, which is listed for $6.45 million, doesn’t have the breathtaking views that others boast, the location is impressive—on top of a hill in a forest-like setting just minutes from the Long Island sound, according to Douglas Elliman agent Kelley Taylor. It’s also completely private, Ms. Taylor said, noting, "I live less than a mile away, and I never knew this property existed until I was referred to the owners."

Like many other land sales, this property is split into two parcels that are 6.46 acres and 21 acres. On one of them, there’s a 6,500-square foot grand mansion that was built in 1907, and has served as one family’s private respite from the bustle of Manhattan for six decades.

While Ms. Taylor said she’s gotten interest from an end-user who’s interested in purchasing the home and all the land for their personal use, and a Chinese buyer who is also looking to use the property as a second home destination, what really has developers interested, Ms. Taylor said, is that the land has three access points and is zoned for 15 1-acre plots with single-family homes.

To get to the list price, Ms. Taylor said, they considered the land as 15 separate 1-acre lots at $350,000 each—a mid-range for the area—and valued the house at an additional $1.5 million. The good news for developers and end-users alike is that the mansion is not on the historic registry, which means there aren’t any renovation restrictions.

"A developer is always looking for the highest possible yield, and what their costs are going to be," Ms. Taylor said.

"But this property is truly unique," she added. "You would never know this little oasis exists so close to New York City."

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