When we retail properties we must understand & evaluate the psyche of our end user. Remember our end user is our client, consumer, & customer all in one. When investors rehab & sell residential housing we must think like our end user. First of all we only want the best for our clients, so the functional integrity of the roof is imperative. Secondly all consumers, which refers to the individuals or households that purchase our rehabs that we put out to the marketplace, need to be sold with selling features. A new roof is a great selling feature for any consumer. Finally, in order to sustain a long term business and build a solid reputation you need to be confident that all your customers are satisfied with the product you deliver to them. By selling a rehabbed house that needs a roof replaced within a year you will not build a strong customer base. The decision to replace the roof needs to be fully understood before you buy the property. If you buy a property that needs a new roof but it is not in your rehab budget, you will be better off not buying the property. In your decision of replacing the roof or not, you must ask yourself "Will it deter me from selling the property if I do not replace the roof?" If the answer is yes then the decision is simple, replace the roof!
Pay now or pay later, if a roof looks questionable to the naked eye I will usually replace the roof. If you do not replace the roof on your investment property that looks like it’s at the end of its useful life then you will most likely get negotiated down on the offers from your end buyers that view your finished product. Although it’s obvious to replace a roof that leaks, it takes more foresight to replace a roof that may, by mere appearance, deter eventual offers. This is where ones knowledge base & hands on experience come into play. I look at it as paying now to incur the cost of replacing the roof in order to have an additional selling feature to help my property distinguish it from the rest of the inventory. By doing this I save significantly on holding cost and days on market. Remember, I typically get full price offers within the first two weeks of my initial listing. This is procured by making these important decisions in the rehab that add to a long list of selling features and distinguishing points once my property is "For Sale."
The outline below is a "cheat sheet" to the essential points on this decision for replacing roofs.
Paul Esajian is a regular guest speaker at CT REIA. Go here for the current list of upcoming real estate investing seminars in Connecticut.
© 2016 Connecticut Real Estate Investors Association. All rights reserved.