Article Title: The most expensive home listed in the United-States 924 Bel-Air Road Bel-Air Los Angeles Article views: (14819 )
Last Modified, 2020-07-30
The most expensive home listed in the United-States 924 Bel-Air Road Bel-Air Los Angeles
The most expensive home ever listed in the United States has been marked down Millions
Correct you heard it right, this once $250 Million Dollar property listing can now be snapped up for a bargain at a mere $188 Million.
This represents a generous 25% discount on the full asking price.
Of course I could List my home at $251 Million and claim to be the record breaking listing yet that would not make a lot of sense.
It seems to me that the developers and Flippers are trying their old tricks to list and flip before anyone wakes up the the reality of the true value.
Value is mathematically intrinsically related to the assets income generating capability and I seriously doubt that the asset in question would ever generate income to justify the listing price.
To put that into context consider the simple maths. To finance the whole purchase let's say we used an 85% loan. 100% loan to value is rarely if ever available to finance such assets so we put a cash retainer of $37.5 Million Dollars down to secure the home and borrow $212.5 Million from our best mate Warren Buffet.
Mr Buffet is no fool and asks a market rate of 5% so an annual interest repayment cost to us of $10,625,000 or a weekly repayment of $204,326.92.
Assuming we can let the asset to generate income sufficient to cover the interest and lets be honest also a little extra for running, maintenance and probably a small profit for our trouble, I could argue that the listing valuation stacks up.
To do a little bit of research to see what we might earn from this property we can simple speak to the Google and ask what we can hire for $204,326.92 per week.
As I am currently just finishing Richard Branson's book "The Virgin Way" I am thinking about how much the Billionaires Private Island Necker Island might cost to stay per night.
A cursory review suggests that I could possibly book the entire Necker Island Resort for a bargain basement rental of just $42,000 Per Night and a villa for $27,000 per week.
Necker Island is believed to comprise up to 30 hectares or approximately 72 acres of income generating real estate. Compare this to the 38,000 square foot of the Bel Air Mansion and you will see where I am going with this. The estate translates at about 9.4 acres as there is 4,047 square feet to the acre. Or looked at another way the Island is about 7.66 times larger than the Bel Air property.
Based on these fundamentals I'd put a valuation on Neckers theoretical Income Stream prior to operational expenses at about $43,680,000 and when grossed up for the 85% loan to Value we could justify $51,388,235 at a push.
It must be noted that I have seen Necker valuations brandished about at approximately $60 Million which in my opinion is a tad aspirational, not unlike the man himself of course! These numbers are rather crude obviously but they are also helpful.
They help us to illustrate a point because they are at least quantifiable measures of value which can be extrapolated to derive a necessary revenue stream to be in the region of approximately $321,702.13 per night, required by the 924 Bel Air Mansion, if it were to be even close to it's listing valuation in the real world.
What do you think?
If you valued the hire cost of the entire collection from Super Cars, Helicopter and Art not to mention the property individually you might achieve some of this but considering you would most likely need one customer to rent the entire lot, I struggle to see how you would consistently find a market to justify a $250 Million Valuation.
Asking rents are based on the fact of course that occupancy rates are very low on average, scaling back the annualised Necker Maximum Potential Income to the valuation and assuming a 5% yield on the property we could estimate vacancy rates at about five to one, or assume the income is nearer to $8,000 per night in actuality. On this basis an investor might desire $55,000 dollars per night to be interested.
Of course the discounted price brings the income requirement down to about $241,920, or an expected $42,000 per night, which would make it on a par with the the Necker Asking price. But Bel Air would need to actually achieve this.
So a property 9 times smaller would need to generate an income 5 times larger to justify the listing price. So who knows? I am left believing this to be a trophy price. A super Giffen Good in economic parlance. The eventual owner would be buying in at trophy or art collectors prices, if found. But just like art and gold these properties are positioning themselves in the space of rare desirable objects.
Unfortunately unlike art and gold, property tends to become somewhat dilapidated rather quickly
Over about 25 years at current accounting depreciation rates, it is only the land that is an appreciable asset. Also with ever more sophisticated building technologies available to designers to build up or down, we must determine this to be substantially over priced.
But this never stopped a developer or buyer of new build property paying the over the odds asking price. If Mr Buffet was really my friend I might just consider booking a viewing, but sadly he is not, we have never met and knowing what I do from reading his books, I doubt that he'd extend me the necessary funding to purchase this fantastic property.
So for now I will have to content myself with watching you tube videos like the one shared in this post. Do make sure to watch it, it is good. Mr Makowsky is a master designer and his creations are indeed unique and very desirable. What he has built is art by any stretch of the imagination and a delight to behold. His rare skill set and proven track record would suggest to me at least, that he will likely pull it off. We wish him well.
So I will conclude by wishing the developer all the luck of the Irish. I for one cannot wait to see what he comes up with next...
All content is for entertainment and educational purposes only and is not investment advice. Prices and estimates used in this blog post are based on theoretical estimates and will change by the time you read the article. Always consider seeking legal or professional advice tailored to your personal circumstances if you are considering making an investment. No employees, investors, owners, associates, partners or staff can be held responsible for any losses you may incur.
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