Putting on a new roof

General Landlording & Rental Properties
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Putting on a new roof

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Member since 2008 · 6 posts · 0 votes

Hi Guys,
So, I'll be closing on my first rental property in about 3 weeks and I just found out this past weekend that the property needs a new roof. I mean, I knew the roof was old, but I thought I'd be able to get away with not replacing it for at least 12 months. Then, this past weekend we actually discovered a small hole in the roof through which water was slowly dripping. So, the roof will need to be replaced immediately. I'm pissed at my inspector not finding this, but that's besides the point. Right now, I'm trying to explore my options for replacing it if I can't back out of the sale (without losing my deposit anyway).

So, my question is, how do the federal taxes work when doing a major repair like this? Can I deduct the whole amount or I do I have to depreciate it? If I have to depreciate, how do I determine my basis? I tried putting this into my tax cut program, but it still wasn't clear.

I know I'll have to talk to a CPA for my specific tax situation, but I'm talking in general.

Thanks,
MyPetSlug

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  • N/A N/A
    OP
    Member since 2008 · 6 posts · 0 votes
    19y

    Maybe it's bad form to reply to my own message, but for anyone that's interested that didn't know the answer, I did some more research and found out this is actually a really complicated question.

    The general consensus of most of the landlording tax books I've looked at says that patching a roof or replacing a section of the roof can be deducted in the same year as a repair. However, replacing the entire roof is considered an improvement since your are "substantially prolonging the useful life of the house", and must be depreciated over 27.5 years. Now, this doesn't entirely make sense logically to me, but at least it's an answer.

    To complicate this though, the tax courts have ruled that in some instances replacing the roof can be considered a repair if the roof still had plenty of useful life left, you were only making the replacement to restore the property to working condition (not, say, to increase it's value), and replacement was the most economical way (like fix a bunch of leaks) of doing that.

    However, to be conservative, I think I'm going to have to depreciate.

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  • Frank Adams
    Loveland, CO · Member since 2008 · 1k+ posts · 123 votes
    19y

    Your research is correct petslug. However, if it only has one leak WHY REPLACE IT?

    I realize that finding that leak can be a bit of a problem. As a roofer buddy of mine always said; "I guarantee I can FIX your leak, I just can't guarantee that I can FIND your leak!? That said I'm not at all suprised that an inspector couldn't find it.

    One other thing, roofing is a pretty easy job. Like most other things on houses 85% of the work is FIELD WORK which requires no brains, just a hammer (air nailer!). It's the "stuff around the edges, rakes, gables, jacks and ridges that require any brainwork at all.

    I get laughed at sometimes for doing roofs, 59 years old, Masters Degree, New Lexus in the driveway and pretty good net worth, but I still do most of my own roofs! I've probably done 25 or so over the past 15 years. I generally hire laborers to do scrape the old one off and I've "taught" a few buddies (aka "Tom Sawyer") how to roof.

    Like most things on house repairs materials are probably 20% of the cost, the rest is (someone else's if you pay) labor.

    all cash

    all cash

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  • N/A N/A
    OP
    Member since 2008 · 6 posts · 0 votes
    19y

    Thanks All Cash.

    Well, I need to replace because, while there's only one leak that we know us, the roof is old. We've been told by a couple of roofers that it's at the end of it's life and they could attempt a patch, but the shingles are so brittle that one patch might lead to another which leads to another and so on. Now, they might all just be trying to sell us on a new roof, but I really don't know anything about rooves, so I'm not in a position to dispute them.

    As for doing it myself. I actually wouldn't mind, but A) I've never done it before and wouldn't feel comfortable unless I had someone showing me how. B) How long is it going to take doing it the first time when you're also working a full time job? C) That's time I could be spending painting or doing one of the many other things we need to do to get the property up and running.

    Anyway, thanks for the reply. At least I'm glad I have the right answer now.

    MyPetSlug

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  • Frank Adams
    Loveland, CO · Member since 2008 · 1k+ posts · 123 votes
    19y

    Yep, if its' old and brittle there's no patching to be done, it's time to replace. Believe it or not I did most of mine when I was working full time. Some were "overlays" so I didn't have to worry about tear off and leaving deck exposed prior to drying in.

    Once you're down to the deck and can get the tar paper down, TIGHT. You can take your time. Living in Houston I would go over about sunrise and start nailing until it got pretty warm, then I'd head to the office. I'd leave about 4:00 or once it started to cool down a bit and nail until about 7:00 and get home in time to greet my wife when she came in.

    I don't stay on the roof in the middle of the day when it's hot, too hot for me and too hot for the shingles to be getting walked on!

    The first roof I did the insurance (hailstorm) paid me $2700, I bought the material (upgraded to archetectural grade) for about #$750, did the work myself over about 2 1/2 weeks and put $2K+ in my pocket; SCHWEET!

    all cash

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  • Lynn Z
    Member since 2008 · 689 posts · 23 votes
    19y

    First, the inspector should give you an idea of the age of the roof and the owner is required to give disclosure on condition/age of the roof. Alot of inspectors are not going on the roofs these days so you can get a roofer or two to give you a roof condition summary. Get one with 20 or so years experience. I agree that most leaks are fixable but most roofers won't do leaks--just entire roofs. A roofer that fixes leaks is invaluable. All Cash is right...finding a leak is the problem. Try and assist in this area..They're always in a rush because the process of patching takes about 5 minutes--once they locate the hole or leak.

    Most inspectors don't call the roof..they just say it could be near the end of its useful life, etc. Ask for the roof in the contract. The owner will fight and carry on but they know the roof is bad to begin with. If you need it done in two-three days, hire someone that you know someone else has used satisfactorily. Make sure they cleaned up after the job (trash/nails is a big problem). Pick your own shingle out and write it in the contract.

    If you do your own roof, make sure you're not liable when someone forgets and steps backwards and falls off. Even your best friend will be suing you. Get that liability coverage. Good luck.

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  • N/A N/A
    Member since 2008 · 38 posts · 1 vote
    19y

    mypetslug
    Do you really have a pet slug? Just curious. I've seen alot of funny screen names, but yours takes the cake.

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  • Luis Leon
    Roofing Contractor · Spring, TX · Member since 2010 · 69 posts · 21 votes
    16y

    As a roofer buddy of mine always said; "I guarantee I can FIX your leak, I just can't guarantee that I can FIND your leak!?

    or when the rain comes in, the warranty runs out...

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  • Just Don
    Member since 2009 · 499 posts · 117 votes
    16y

    first off what pitch roof is this? Too steep to walk on use toe holds and harnesses are a nice feature. IF you know where the leak is you can buy yourself a little while with a piece of tin and some black jack. BUT here anyway ,,,now is the time to do it quick. When it gets too cold to seal them down your subject to wind damage all winter long.

    Arch. shingles are a better idea,,they even make a 300 # lifetime one now resistant to hail etc. They also make a synthetic paper that is stronger and better than roofing felt,,tar paper for the golden oldies like me.... How do you know its only leaking one place?

    Hasnt been but couple small showers in last three weeks here now,,,excellent and time to do this. Read and follow instructions,,research roofing tutorials and other online info. Do one segment or slant of the roof at a time

    How many square is it? Nail guns make it much easier. Used to pound those nails till your fingers hurt.

    If you can paint you can roof.

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