Let’s pick up where we left off on Monday’s discussion about “dog units” and explore another real estate catch-phrase that could significantly impact your investment: the “for now view.”
It should be pretty self-explanatory, but just in case it’s not, there’s a video below.
Every buyer contemplating the purchase of a condo with a great “for now view” has to consider what that view is worth today, and while the buyer is living in the unit, and ultimately assess the risk that the view is one day diminished…
I asked my client to assess the risk of this “for now view,” and he laid it out as follows:
1) How long will I live here?
2) What are the chances that a condo is built south of here?
3) When is it realistic that the project could break ground?
We figured that if the south view were significantly obstructed, that $1.5M condo with a view could be impacted to the tune of $400,000. It would still have a nice east view, but so do many units. How many units face pure south, with that kind of skyline? That is where the value lays in this unit, otherwise it’s “just” another condo.
Let’s say that a condo project was going ahead immediately south. Even if there wasn’t a hole in the ground, but a project was approved, the buyer pool would know that the view will soon be gone, and thus much of the value of the condo would go with it.
Say that’s five years from now. That would mean that the buyer of this unit, today, would spend $400,000 on that view, for five years, or $80,000 per year.
Is it worth it?
Every buyer is different, and you might suggest that some rich playboy buying a waterfront condo with a “Million Dollar View” might consider it money well spent.
But nobody likes losing money, and especially not those who have lots of it.
Then again, we all have a different tolerance for risk…
grasshopper
at 11:32 am
I’ve often wondered why owners of units like this don’t sell as soon as activity starts to happen which would impact their view. Would they face any liability for failing to disclose that the view of the unit could be impacted or is that purely the responsibility of the buyer?
Paully
at 7:39 am
Having just moved this week, I would guess that they don’t sell because moving sucks! Completely, utterly, totally!!!
Appraiser
at 8:28 am
Perhaps a bit off topic, but speaking of the “view for now”
A big shout-out to Ben Rabidoux of analyst and strategist fame, on his fourth anniversary of calling a crash in real estate. By my rough calcs. the market needs to drop by at least 55% for Benny to redeem himself.
Any takers?
Steve
at 8:11 pm
Hmmm …. what I can say, it that Benny may not have timed the market drop correctly (few ever do), but he may still be proven right. Record debt levels, the inevitable end of cheap money, and sluggish economic growth, may still throw a big monkey wrench into the market.
I wouldn’t blow my horn just yet.