Expensive repair on rental. Should I do it?

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Expensive repair on rental. Should I do it?

Supada L.
New to Real Estate · Member since 2020 · 147 posts · 134 votes

Hello,

I have an out-of-state rental that I've relied on the property management to take care of it. I have owned the property for about a year and there has been minor fixes that already turned my first year cashflow negative.

Earlier this year the tenant has submitted a repair request for the drive way as shown in the pictures below. My PM got a quote for $5500 to repair it. Should I let them do it? Or is there a way to mitigate the cost? Any suggestions are welcome.

Thank you in advance,
Supada

The tenant complain: "Driveway pavement is coming up & it is tearing up the front end of my cars!"

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Steve Vaughan
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
5y
Originally posted by @Supada L.:

I have an out-of-state rental that I've relied on the property management to take care of it. I have owned the property for about a year and there has been minor fixes that already turned my first year cashflow negative.

This is the lesson here.  OOS managed rentals can't cash-flow when the Maytag Man needs to be called for every little thing.  Period.

OOS 'passive' rental ownership should be more of a wealth preservation strategy rather than accumulation needing cash-flow strategy.  There will always be minor fixes. 

Yep, definitely replace that driveway with concrete.  Need to think long-term👍

16Reply
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  • Supada L.
    OP
    New to Real Estate · Member since 2020 · 147 posts · 134 votes
    5y
    Originally posted by @Jim K.:

    If the soil underneath is unstable, I'd break it up and drop gravel with landscaping timbers.

    Thank you. I'll look at that option as well. 

    0Reply
  • Supada L.
    OP
    New to Real Estate · Member since 2020 · 147 posts · 134 votes
    5y
    Originally posted by @Bonnie Low:

    You're definitely going to want to repair that. It's a lawsuit waiting to happen. But I would spend the time to call around to some concrete and paving contractors to get your own quote. PM companies are notorious for not shopping around and for padding their repair quotes.

    Thank you so much. I will shop around. 

    0Reply
  • Supada L.
    OP
    New to Real Estate · Member since 2020 · 147 posts · 134 votes
    5y
    Originally posted by @Santiago Marquez:

    Whoa, that driveway looks way to expired to have been missed on any inspection report upon purchasing. Good thing no one has gotten hurt falling over that thing. It’s rough to look at in pics. I like what other BP members have mentioned so far but these are my two faves.1- Complete tear down, framed & poured new 6” driveway. 2- Complete tear down & crushed blue stone gravel laid down. Although confirmation should be made about any underlying reasons this has happened. Perhaps now is a better time than any to get a quick lesson on driveway anatomy for future properties. If nothing is found irregular choose the best that fits your budget w/safety & peace of mind involved. Last thing you need is a lawsuit to shut the whole deal down. 

    Yes. Sure thing. I will shop around for the contractors as well. Thank you so much.

    1Reply
  • Supada L.
    OP
    New to Real Estate · Member since 2020 · 147 posts · 134 votes
    5y
    Originally posted by @Luis Limon:

    Adding to previous replies about gravel.

    gavel does not crack. If the terrain is unstable and sinks some in a few years you just top it off for significantly less money.

    Get the foundation checked since you are at it, there might be a few gremlins in there.

    Oh, no! Gremlins. Hope my tenants don't feed them after midnight. :D
    Thank you for your suggestion. I'll look at that option as well.

    0Reply
  • Daniel Sabato
    Member since 2018 · 105 posts · 21 votes
    5y

    @Supada L. Already spoke through direct message with the poster of this thread but figured Id mention it here for everyone else. I’ve got no personal hate toward Roofstock & I actually was singing their praises initially. However, I purchased 2 properties through them a year ago. Though the process was easy & they seemed like great deals, I’ve had nothing but issues with them. Dozens & dozens of small repairs that have really added up (Part of life I know) but that hasn’t been the case with my other purchases. Also, major foundational issue on one property which roofstock provided FIVE inspection reports for, none of which said anything about it being an issue. Anyway, be careful when buying from them. I’d hire an independent inspector & appraiser before purchasing from there because they very clearly do not do their due dillegence or care about it once they’ve sold the home.

    2Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    5y

    There is no way that damage happened in a year, so if you've only owned it for a year, it would have been like that when you bought it.  You said you never toured the property before buying it.  The amount of money you spend on a house is worth a trip to see it before you close.  Get it repaired and ask them if it comes with a warranty.

    1Reply
  • Santiago MarquezPro Member
    Rental Property Investor · Bronx, NY · Member since 2017 · 152 posts · 65 votes
    5y

    @Supada L. one more thing that no else mentioned was the itemized deduction you’d make for this mid-range, but still expensive, expense. Talking w/your CPA & applying to your taxes for next year. This a capital improvement for your rental & should be considered as such on your return. Which means a nice portion coming back to you at some point.

    0Reply
  • Andrew SyriosPro Member
    Moderator
    Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
    5y

    This looks pretty bad and I would recommend repairing it sooner rather than later.

    Podcast Guest on Show #121
    1Reply
  • Jim K.
    Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
    5y
    Originally posted by @Supada L.:
    Originally posted by @Jim K.:

    @Supada L.

    Yes, burdensome unexpected costs are part of REI, but I'm curious about the inspection reports dating from last year that you mentioned. They didn't mention that the driveway was falling apart at all? Even in the worst-case scenario, I would Google-Maps-onestar-review the hell out of any home inspector who was too blind to see and too stupid to report what condition the driveway was in.

    Thanks for your response.
    That also bothers me. The inspection reports didn't mention anything about the driveway at all. :(

    That's unacceptable by any reasonable standards of inspection diligence, whatever they protest. There's no plausible deniability here, given the condition of the driveway. The only possible scenario under which the driveway could have gone from acceptable to beaten-up like that in just one year even in PA's climate was if the tenant drove home every night and up the driveway in a tracked tank.

    In line with other comments, I would definitely would start giving Roofstock hell as well as any certified home inspector I could track down through the reports. The sellers and their people can't have any grounds for legitimacy to just give you a smile and a thumbs-up here.

    1Reply
  • Andy Thompson
    Contractor · Denver, CO · Member since 2014 · 38 posts · 24 votes
    5y

    @Supada L.

    Are they good tenants?

    This sounds like less of a driveway problem (it certainly needs replacement) and more of a tenant relationship opportunity. Being a good landlord means maintaining the professional relationship with the tenant.

    If they're good tenants, do the repair now. Time lost to vacancy to find another equally good tenant might not be worth rolling the dice. Be thankful that they care to notify you of items needing repair so you can keep up your investment. Bad tenants might have let the driveway, and other items you don't know about, continue to degrade and you'll get shocked with even greater costs on any number of undisclosed problems when you finally find out. If these are potentially long term renters, maintain the relationship as if you want them to stay for a long time. You might find that this gesture is the beginning of a long (and profitable!) agreement.

    If they aren't documented as excellent tenants (late payments, petty maintenance requests, etc), don't replace the driveway yet. Do listen to their complaints and maybe grind down the high spots for $500 and ride it out till they leave, while budgeting for the repair. Then, while looking for better tenants, replace the driveway and see if you can push rent to cover the costs.

    Or, if their lease is up soon and you want them to stay, replace the driveway now and push rent to cover when they renew.

    2Reply
  • Lane Aakhus
    Investor · Honolulu, HI · Member since 2019 · 47 posts · 25 votes
    5y

    Just curious, after you purchased the property from Roofstock, did they set you up with a PM or did you go out and find your own?  Did you have a home inspection performed and the driveway wasn't mentioned??  Best of luck to you with this investment!

    1Reply
  • Supada L.
    OP
    New to Real Estate · Member since 2020 · 147 posts · 134 votes
    5y
    Originally posted by @Daniel Sabato:

    @Supada L. Already spoke through direct message with the poster of this thread but figured Id mention it here for everyone else. I’ve got no personal hate toward Roofstock & I actually was singing their praises initially. However, I purchased 2 properties through them a year ago. Though the process was easy & they seemed like great deals, I’ve had nothing but issues with them. Dozens & dozens of small repairs that have really added up (Part of life I know) but that hasn’t been the case with my other purchases. Also, major foundational issue on one property which roofstock provided FIVE inspection reports for, none of which said anything about it being an issue. Anyway, be careful when buying from them. I’d hire an independent inspector & appraiser before purchasing from there because they very clearly do not do their due dillegence or care about it once they’ve sold the home.

    Thanks Daniel for bringing it up. I second that. They provided three inspection reports on this property and none of them said anything about the driveway. The photos they posted didn't show this part of the driveway either.

    0Reply
  • Supada L.
    OP
    New to Real Estate · Member since 2020 · 147 posts · 134 votes
    5y
    Originally posted by @Theresa Harris:

    There is no way that damage happened in a year, so if you've only owned it for a year, it would have been like that when you bought it.  You said you never toured the property before buying it.  The amount of money you spend on a house is worth a trip to see it before you close.  Get it repaired and ask them if it comes with a warranty.

    Thank you. I'll ask them about that.

    0Reply
  • Supada L.
    OP
    New to Real Estate · Member since 2020 · 147 posts · 134 votes
    5y
    Originally posted by @Santiago Marquez:

    @Supada L. one more thing that no else mentioned was the itemized deduction you’d make for this mid-range, but still expensive, expense. Talking w/your CPA & applying to your taxes for next year. This a capital improvement for your rental & should be considered as such on your return. Which means a nice portion coming back to you at some point.

    Good point. Thank you so much. I'll keep the receipt for sure.

    0Reply
  • Supada L.
    OP
    New to Real Estate · Member since 2020 · 147 posts · 134 votes
    5y
    Originally posted by @Andrew Syrios:

    This looks pretty bad and I would recommend repairing it sooner rather than later.

    Thank you. I'm shopping for the contractor right now.

    0Reply
  • Supada L.
    OP
    New to Real Estate · Member since 2020 · 147 posts · 134 votes
    5y
    Originally posted by @Jim K.:
    Originally posted by @Supada L.:
    Originally posted by @Jim K.:

    @Supada L.

    Yes, burdensome unexpected costs are part of REI, but I'm curious about the inspection reports dating from last year that you mentioned. They didn't mention that the driveway was falling apart at all? Even in the worst-case scenario, I would Google-Maps-onestar-review the hell out of any home inspector who was too blind to see and too stupid to report what condition the driveway was in.

    Thanks for your response.
    That also bothers me. The inspection reports didn't mention anything about the driveway at all. :(

    That's unacceptable by any reasonable standards of inspection diligence, whatever they protest. There's no plausible deniability here, given the condition of the driveway. The only possible scenario under which the driveway could have gone from acceptable to beaten-up like that in just one year even in PA's climate was if the tenant drove home every night and up the driveway in a tracked tank.

    In line with other comments, I would definitely would start giving Roofstock hell as well as any certified home inspector I could track down through the reports. The sellers and their people can't have any grounds for legitimacy to just give you a smile and a thumbs-up here.

    Yes. I've sent Roofstock an email and will follow up on Monday. Thank you so much.

    0Reply
  • Supada L.
    OP
    New to Real Estate · Member since 2020 · 147 posts · 134 votes
    5y
    Originally posted by @Andy Thompson:

    @Supada L.

    Are they good tenants?

    This sounds like less of a driveway problem (it certainly needs replacement) and more of a tenant relationship opportunity. Being a good landlord means maintaining the professional relationship with the tenant.

    If they're good tenants, do the repair now. Time lost to vacancy to find another equally good tenant might not be worth rolling the dice. Be thankful that they care to notify you of items needing repair so you can keep up your investment. Bad tenants might have let the driveway, and other items you don't know about, continue to degrade and you'll get shocked with even greater costs on any number of undisclosed problems when you finally find out. If these are potentially long term renters, maintain the relationship as if you want them to stay for a long time. You might find that this gesture is the beginning of a long (and profitable!) agreement.

    If they aren't documented as excellent tenants (late payments, petty maintenance requests, etc), don't replace the driveway yet. Do listen to their complaints and maybe grind down the high spots for $500 and ride it out till they leave, while budgeting for the repair. Then, while looking for better tenants, replace the driveway and see if you can push rent to cover the costs.

    Or, if their lease is up soon and you want them to stay, replace the driveway now and push rent to cover when they renew.

    Thank you for your comment. I have not thought it this way. The talents made a couple late payments last year, which, I think, is acceptable. 

    0Reply
  • Supada L.
    OP
    New to Real Estate · Member since 2020 · 147 posts · 134 votes
    5y
    Originally posted by @Lane Aakhus:

    Just curious, after you purchased the property from Roofstock, did they set you up with a PM or did you go out and find your own?  Did you have a home inspection performed and the driveway wasn't mentioned??  Best of luck to you with this investment!

    Thank you!
    They gave me the list of PMs I could interviewed and chose from. I didn't do my own inspection as they provided three inspection reports and none of them mentioned the driveway.

    0Reply
  • Victor S.
    WorldWide · Member since 2016 · 1k+ posts · 1k+ votes
    5y

    $5,500 is probably two years of your cash flow. i will second and third the gravel recommendations. had a 10 ton gravel dump truck show up for $500 before, so unless that's against the city code, i'd go that route instead.  

    1Reply
  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    5y

    What is the address of this property ?

    1Reply
  • Andrew SyriosPro Member
    Moderator
    Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
    5y
    Originally posted by @Supada L.:
    Originally posted by @Andrew Syrios:

    This looks pretty bad and I would recommend repairing it sooner rather than later.

    Thank you. I'm shopping for the contractor right now.

    That's the right call I think. Make sure to get at least two bids on it too

    Podcast Guest on Show #121
    1Reply
  • Justin R.
    Developer · San Diego, CA · Member since 2015 · 1k+ posts · 1k+ votes
    5y
    Originally posted by @Steve Vaughan:
    Originally posted by @Supada L.:

    I have an out-of-state rental that I've relied on the property management to take care of it. I have owned the property for about a year and there has been minor fixes that already turned my first year cashflow negative.

    This is the lesson here.  OOS managed rentals can't cash-flow when the Maytag Man needs to be called for every little thing.  Period.

    OOS 'passive' rental ownership should be more of a wealth preservation strategy rather than accumulation needing cash-flow strategy.  There will always be minor fixes. 

    Yep, definitely replace that driveway with concrete.  Need to think long-term👍

    I wish I could upvote this 20 times, and make this thread required reading for every single person who considers this approach to investing.  It's educational. 

    2Reply
  • Supada L.
    OP
    New to Real Estate · Member since 2020 · 147 posts · 134 votes
    5y
    Originally posted by @Victor S.:

    $5,500 is probably two years of your cash flow. i will second and third the gravel recommendations. had a 10 ton gravel dump truck show up for $500 before, so unless that's against the city code, i'd go that route instead.  

    Thank you. I'm not sure about the city code. I'll check on it.

    0Reply
  • Supada L.
    OP
    New to Real Estate · Member since 2020 · 147 posts · 134 votes
    5y
    Originally posted by @Carlos Ptriawan:

    What is the address of this property ?

    It's in Meridian, MS. Do you know a contractor?

    0Reply
  • Supada L.
    OP
    New to Real Estate · Member since 2020 · 147 posts · 134 votes
    5y
    Originally posted by @Andrew Syrios:
    Originally posted by @Supada L.:
    Originally posted by @Andrew Syrios:

    This looks pretty bad and I would recommend repairing it sooner rather than later.

    Thank you. I'm shopping for the contractor right now.

    That's the right call I think. Make sure to get at least two bids on it too

    Thank you. I sure will.

    1Reply
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