Home Buying in Oakland>Question Details

Colleen, Home Seller in Concord, CA

investment house is it worth to buy if I need to replace the roof?

Asked by Colleen, Concord, CA Mon Jan 7, 2013

Hello,
I v'e offered house on 1903 94 aveunue, Oakland. Inspection shows roof needs to be replaced.
This is a investment house. Seller just gives us 3K credit . Inspectors says cost might be 10K. Is this house worth to buy if I spend the expense from my pocket? I will be renting it?

Thanks

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Answers

8
Carl Medford’s answer
I own rentals and so am acutely conscious of cost of ownership vs. income. If you own a property for a long time, then at some point in time replacing the roof will be a likely option. In my opinion, if you can get a good house for a decent price and the rental numbers work, then having to put a roof on up front is not a bad thing. It will actually be one less thing you’ll need to worry about over the years that lie ahead.

The other issue here is the ability to actually buy a house in the current market – there is not a lot out there and if you have an accepted offer, you might want to consider sticking with it instead of continuing to look while prices go up because of lack of inventory.

Lastly, with prices going up so quickly, it’s very possible that you will have made your money back in equity before the roof is finished being installed.
0 votes Thank Flag Link Tue Feb 5, 2013
Hi Colleen,

It is always good and bad to find out about issues when doing inspections. Good because you know all the details, but frustrating because it can add to the complexity of the purchasing process.

I think the only way you can decide if it is a worth you buying is to sit down and write down the pros and cons of the purchase. I don't know all the details of the purchase (how much you put down, is there other work that needs to be done, what is the current estimated ROI, was it a multiple offer situation?). There are usually several different deciding factors that dovetail together that will help you make your decision.

Obviously the roof is definitely an important repair. If there are leaks it will only cause more problems down the road.

I would also suggest that you receive 3 bids from different roofers to you can compare and contrast the cost of repair. You may find that you are able to complete the repairs needed for a price that is more comfortable with your bottom line.

Hope that helps!

Lisa Cartolano
Alain Pinel Realtors
0 votes Thank Flag Link Mon Jan 7, 2013
we had ispection after latest rain. Right now looks like no leak in the house. For certain we need to replace the roof ASAP.
0 votes Thank Flag Link Mon Jan 7, 2013
Right now, it may not leak....but consider Murphy's Law. It may leak after you close escrow. If you're nervous about it now, think how nervous you would be when you rent it out, and then it leaks. Can the tenants sue you for health and safety hazards as well as damage to their property. You betcha.
Flag Mon Jan 7, 2013
Keep in mind that a real estate agent can advise you on the financial performance of a specific piece of property, but not on your overall financial situation. Always get advice from a financial planner and tax professional before investing in real estate or as the parameters of a potential real estate deal change.
0 votes Thank Flag Link Mon Jan 7, 2013
Put it another way....

If you rent it out, and the roof leaked, you will
1) be responsible for damage done to tenant's property
2) you will bear the cost of repairs anyway
3) consider the health risks to the tenants --- why would anyone rent out a house where the roof is likely to have problems?

Your future costs could be higher.....
0 votes Thank Flag Link Mon Jan 7, 2013
we asked 10K credit and seller just wants to give 3K.

if I go with this house I will be keeping at least 10 years renting it. .I know real estate marked won't like before anymore. My hope is at least after 10 years I can make some money.
0 votes Thank Flag Link Mon Jan 7, 2013
Allow me to be direct here. If you are working with an agent, then please ask your agent for calculating the investment returns before and after the capital improvements. If she / he cannot do that you are working with the wrong agent. If you are not working with an agent, ask your self why you made that decision, and why any of us, brokers, would assist you now, after the offer has been accepted. Our knowledge and experience is for sale and we only get paid a commission for completing a sale. Please remember that in future.
Kindly.
Antoine
0 votes Thank Flag Link Mon Jan 7, 2013
Bravo, Antoine!
Flag Mon Jan 7, 2013
The biggest consideration is whether or not your investment numbers still work for you after you spend $10k (or more) on the roof. I'd ask for the complete cost of the roof as a credit, not just $3k.
Another huge consideration is if your lender (if you're not buying cash) will allow escrow to close with the current roof in place. If not, either the seller has to replace the roof or you'll end up having to do it. The risk is that if you spend money on the house and escrow doesn't close, you may have a heck of a time getting back what you spent on the roof.
If the seller won't discount the sales price by the cost of the roof or replace the roof himself, I'd seriously re-consider if I want such a deal.
0 votes Thank Flag Link Mon Jan 7, 2013
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