How do the numbers work w/ eventual roof replacement costs?

[Chace Cottles]

Hey Team,

I’ve been listening to all of the recommended podcasts & books & have done my best to understand what I can before diving into my first deal, but I still have a couple of specific questions I’m hoping someone can help with. Please understand I’m learning through the lenses of the Montgomery, AL & Huntsville, AL markets.

1. Roof costs. Am I wrong in thinking that the costs of eventually replacing a roof of a property significantly impacts the equity value? How do you factor that in to monthly rates?

2. Many investors cite a 2-5% growth rate in certain areas, where can I look for historical data that supports the idea that a particular area might have sustained growth rates rather than slow or even decline with new builds & expansion? Am I over thinking this?

Thanks everyone!

[Joseph Back]

@Chace Cottles I agree with @Peter McDonough regarding the roof costs. Just take the replacement cost and divide it by the remaining life and make sure you are putting that much money aside each month to account for eventually having to replace the roof.

For your second question I would just look at Census data for the whole city and see what the population growth rate looks like, this will be a big driver of future housing demand and appreciation. For example, in Montgomery the population has been rather stagnant and actually declined slightly over the last 5-10 years, therefore, I would not expect much if any appreciation going forward. Flipping the coin to the other side, Huntsville's population has been growing at a very fast rate over the last 5-10 years and therefore has a much higher probability of having future appreciation and growth.