Does a new roof over-improve this house?

Question

Bought my first house a few weeks ago planning to buy & hold it.  The original budget was 14k.   It would've been a marginal flip (I projected I would've made only $9k if I flipped it today), but the rental rates are strong in that area and I projected a 31.5% COC% on a rental.

Unfortunately, things went off the rails before the renovation has even started.  My estimates for the new roof ended up being way off.  I had budgeted 4k for the roof (estimated by my contractor friend who owns 30 houses of his own and has re-done several roofs), but bids are coming in, in the 7500-9500 range which is remarkable for an 1100 SF house (2 weeks later, I'm still getting new bids).  The problem is the roof over the carport and back addition were both flat, so they were prone to major ponding.  I wanted to rebuild them on a pitch using a TPO tapering system so the water would trickle off the roof.  Even my contractor friend was stunned at how pricey this is turning out to be.

The problem I have now is that I feel this tapering system is probably a negative investment from an investors standpoint.  I feel buyers/renters won't care that I put all this extra money in just to make the roof pitched. They'll care that it's new, but they won't pay any extra just because I paid to have it pitched (given that most roofs are already built with a pitch).  To a buyer/renter, a new roof is a new roof whether it costs 4k or it costs twice that.  There's nothing in the sales comps that suggests the ARV of the value would go up a tapered roof.

The larger issue looming would then be the rest of the scope of work.  To save some money for the roof overages, the biggest ticket items I have that could be cut to save money are things that buyers/renters really would care about.  I could save $3000 just by not re-painting the entire house inside and out (the house was painted 3 years ago and is "okay"; I would just only paint the bad areas) and leaving the crappy kitchen countertop and kitchen cabinets.  Of course, these are things that renters/buyers actually care about more than a roof and thus if I cut them, then this new $8k roof could end up lowering my ARV/rental rate as opposed to raising it!  If I keep all of them, it might at best keep the rates the same as I had projected but now I'm sinking an extra $5k of my money into an abyss.  That's over a full year of net rents to get that back for something that might add nothing to ARV!

Do you think that this TPO system for the roof is in fact an over-improvement or am I wrong?  If I do go ahead and do it, do I just suck it up, leave everything in the SOW, and just take the loss on the roof project?

Edit: Just to clarify something.  If I rebuild the roof without the tapering (leaving the carport roof flat and thus still prone to the long-term effects of ponding), it would save something like $600-1k off bids.  It's unlikely ponding would become a major concern on a new flat roof for 10 more years but would obviously depreciate faster (the tapering system has a 20-25 year shelf life).

Rodney Marcantel · Answer

Bite the bullet and do the tapering roof as you'll recoup it when you sell down the road as long as homes in that area appreciate. Also, you'll be protecting your investment by doing it right. If you were flipping it, I'd probably swing the other way and leave it flat.

Scott Le · Answer

My REI mentor owns 33 houses in this area, all roughly the same size as mine (1150 SF) and co-owns a subcontracting firm.  Of his 33 houses, he's never paid more than $5000 on a new roof.  The issue with my house is wanting to build the pitch and that the slope of the main roof requires modified shingles and not the cheaper tile kind.  That's why the bids are coming in so high.  These are not "standard" prices for this area (fortunately, for future projects).  If I just had a normally pitched roof with tile shingles over 1150 SF house, then the bid would probably have been where I initially expected in the 4-5k range.

I have an unlicensed bid for $5500 (already talked him down from 6k).  The lowest licensed bid I have for the pitch is $7800.  I said from the onset that if it was within $1000, I would've paid up for the licensed roofer.  For that much money, I think I have to just pay the 5500.  It's just such a lifesaver for my budget and he has done good work for my REI mentor before.

Manolo D. · Answer

@Scott Le Not fixing the pitch is a temp fix, if you hold the house, then you will redo them in a couple of years, or probably it will turn-off buyers or will give you a bad rep because you sold them something that's broken (ponding). On first hand, don't believe in warranties, just to be safe, when you file a claim, they will give you the run-around anyway. The bids for pitching is normal, go with a professional, it pains but at least it heals and doesn't come back, look on the bright side, at least you don't have to pay for it twice.

Dave DeLima · Answer

@Scott Le The prices are not that bad, for what you would be getting. The material alone would be between $4000 and $4600. Shingles alone have gone up 100% in the last 10 years. Wages have not.

Dave DeLima · Answer

The prices are not that bad, for what you would be getting. The material alone would be between $4000 and $4600. Roofing material is not cheap. Shingles have

Scott Le · Answer

Hi Dave.  You can't see the main roof (or much of it at least) but here is a good pic of the carport flat roof. There's about 600 SF of flat roof and about 1400 of the main roof.

With the bids I've been getting for tapered, I am starting to seriously consider just rebuilding it flat. Another option is that I also have a friend of a friend (who comes highly recommended) who might be able to do the tapered for $2500 less than everyone else but is not licensed and can't pull permits.

Dave DeLima · Answer

@Scott Le My previous business was a roofing company. I would go with the tapered insulation if the water on roof is ponding. Any coating you get is not going to help it is going to mask the problem. If you have pictures I could further advise. It hard to tell without looking at it.

Timothy Riley · Answer

Short cuts often end up cutting me shortly (soon after). Get it done correctly by professionals that can supply receipts along with warranties giving you a paper trail to add to your comforts of one less worry.

If you are going to buy and hold this as a rental time will reimburse the money spent.

Tim

Scott Le · Answer

Thanks Tim.  What is your opinion on my roof situation?  If I can get away with sealing it for 1-3 years for $1000, do I go ahead and delay the new roof (which will cost at least $7k if I go with a licensed roofer, $5.5-6k with an unlicensed)?  Or do you think I should just do it now?

If I delay it by sealing, that means I can focus more money now on some of the cosmetic items I was going to skimp on (new kitchen countertop, cabinets, full re-paint as opposed to partial).  Hopefully by the time the sealing runs out, the cash flows from the rents will have paid for the new roof.  That said of course, it's likely a band-aid solution and eventually I'll have to get to the roof anyway.

(All of thus depends on whether or not I can get the roof insured by sealing it anyway)

Does a new roof over-improve this house?

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