Is Newer Always Better?
Some cities and skylines have great eye appeal but what happens when you start to look closer? Some of the buildings and properties look great from a distance, but once you get closer you start to realize the age of the structures.
When you look at properties, on Oahu the prices are usually set by a few things. First is location and the second is condition. The real question is — do you buy into an older building that needs possible work, or stick with a newer structure?
I am of the opinion you really need to weigh the options and, for safety reasons, I think newer is usually better. This fact became crystal clear to me with the recent Marco Polo Building Fire. This is an iconic building in a great McCully Town location, but the building did not have sprinklers. On July 14, 2017, the 36 story building had a 7 alarm blaze that quickly spread from the 26th, 27th, and 28th floors. This horrific event took the lives of 4 people and injured 13 others. The building had over 200 units damaged in the blaze. This 1971 structure has no fire suppression system or sprinklers. The building had received quotes of about $4.5M for the sprinklers costing each unit nearly $8000 in assessments, but never installed the system.
Almost 60 days later and the building is still dealing with the aftermath and repairs. Currently, there are still over 300 high rise buildings on Oahu without sprinklers. Once you start with the repairs of these older buildings, then you have to look at the popcorn ceilings and the potential of having asbestos and other unforeseen repairs.
This is why the newer buildings might have a higher purchase price but how can you value life-saving features?
The newer buildings generally will have better safety, building and structural codes applied making them safer long term. Not to mention the fact that the costs of newer HOAs will generally be lower since they can more accurately gauge the repair and maintenance items.
If you are in an older building and an assessment is leveled, this can be a huge additional cost to the property owner who might not be budgeting and certainly not expecting this cost.
Value and Resale
The last component is value and resale. These older buildings saw an immediate downtick in value. This is coming from fear of possible assessments, and also the realization that if it can happen in one building, it certainly can happen in another.
Hopefully after this tragedy lawmakers will move quickly with new rules and requirements to above all else safeguard and protect lives. Make a good, informed decision when buying into a building. Find out all you can about the structure and what might be possibly looming with assessments. When you factor in a higher purchase price, it might be hard to swallow initially, but remember this is broken down over the term of your mortgage. If you have a special assessment to deal with, it will certainly be a much shorter duration of payback. The best advice is to be informed and educated before you make that purchase.