How to cover roof repair before purchase

[Evelyn Randolph]

Hello, BP Community!

I reached agreement with a seller to buy their 12 unit building at a very good price, but the property is located in an area where I'm required to have windstorm insurance because it's location close to the Gulf. I can get coverage through Texas Windstorm Insurance Association (TWIA), but they would not insure without a new roof that meets their standards. The bank I'm getting the loan from requires insurance to be in place prior to closing.

Because I'm buying at such a good price, the seller will not pay for the roof. I have the funds to pay for the roof replacement, and I would pay for it ahead of the actual purchase, but hate loosing on the tax depreciation on installing a new roof since I'll be paying for something I don't own.

Are there any strategies I could use to still claim the depreciation, or any way that the transaction could be structured such that I don't lose on that tax benefit?

[Greg Scott]

Talk with your lender about this proposal...

  1) Get a solid quote on the roof replacement and share it with your lender. 

  2) Put the funds in escrow with your bank for the sole purpose of replacing the roof. 

  3) Close on the property.  

  4) Install the roof.  

  5) Get reimbursed for roof expense out of escrow.

Most banks are fine with something like this if they know their downside is covered.  They will probably let you close.