Nov. 7, 2006 - another illustration from Sunday’s Times / the pitfalls of paying to impress someone else
make improvements that make your life better, not that might increase ‘value’
Front page Real Estate Section article in Sunday’ NY Times was entitled “Which Building Improvements Really Pay Off?” This article illustrates how misguided it is to pay money for fashion rather than utility or pleasure.
The thrust of the article is that a building should pay for things that increase resale value. The top value is assigned to a doorman, but (for some reason) the ‘big three’ are identified as gyms, roof decks and children’s playrooms. I am not sure exactly what these amenities can add to resale value (the article reports that Jonathan Miller provided data for a study about the value added by doormen that won’t be published until next Summer), but I think it is wrong to chase Other People’s Value – whether for a building or an individual owner.
why spend money to please other people?
The Real Estate Industrial Complex is full of advice about what kind of kitchens to have because they enhance resale value, or how to remodel a bathroom to increase resale value. I just don’t get that.
It is OK to think about resale value when you contemplate a capital improvement, the driver for any decision should be whether it makes your loft a more pleasant place to live. Period. (Except if the property is an investment/rental property.)
If a funky color makes you happy – go for it! If your tastes are very idiosyncratic about appliances or built-ins or lighting, go for it!
pay for more smiles
The highest value is for things that make you live more comfortably and make you smile more when you come home. Everything else is secondary.
Then there is the problem that if you make decisions based on anticipated resale value, the tastes in the market may change before you sell. The stainless steel beauties that you put in because everyone has them (even though you preferred a calm white) may be out of fashion when you try to sell. The children’s playroom that a building spent $50k to build because someone on the board read the NY Times on Sunday may never get used, or may get turned into a humidor in five years to chase the next trend.
playroom math gets dicey
Don’t get me wrong. If the families in the building will get value out of a play room (or the grandparents who live there will more often get their grandchildren to visit), that might be a sensible decision. (I would think very hard about the age range of kids who would use such a facility; especially in a small building, there may be only two or three families who might use a playroom in any three year period.)
Same thing with the roof deck issue. That 120 unit prewar on West 81st St that built a beautiful roof deck for $259k might find that it enhances the living experience of shareholders enough to be “worth it” (as they anticipated when they went ahead with the project, no doubt), but it may never be proven to increase resale value. If I am a shareholder there, that is not a bad thing.
I know from personal experience that the availability of a roof deck (even if not used frequently) can provide a relief from life in ‘the city’. Whether one goes up once in a while on a Sunday with the newspaper or a cup of coffee or a glass of wine at sunset, or just feels better because you know you can, there will be added value if the shareholders find value in that.
hubris is thinking you can predict future tastes
Especially on loft buildings of 50 units or fewer it can be a big mistake to try to guess what the future market will value.
another hot topic: generational differences in spending common funds
The issue of differences of view about how to spend building money is another very pertinent point for loft buildings that was addressed in the Times article, but that is for another post.
© Sandy Mattingly 2006
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