Roof Replacement (Capex) vs. 1/2 Roof Replacement (Opex)?

28 Replies

The roof on my townhouse is nearing the end of it's useful life.  The ridge cap recently blew off and I'm facing the old "repair or replace" question - with a twist.  It's a simple peaked roof.  The front slope faces SW and is exposed to the sun.  I could replace it right now and feel good about it.  The back slope is more protected and has more life left.  I don't feel so good about replacing it right now.  A roofing contractor suggested something I'd never heard of: just replace the front half.  He said that way it would be considered a "repair" and could be expensed as opposed to replacing the whole thing which would be a capex and would have to be depreciated, not expensed.  Does that make sense?  Have any of you done that?  Thanks!

I can't answer the question about depreciation but why are you making it sound like a bad thing? 

I see potential problems with replacing just half the roof. I would either do a temp repair on the ridge cap or suck it up and replace the entire roof and be done with it.

Correct me if I'm wrong, but depreciation lets me write it off over 27 years, but if it's considered a repair I can write off the entire cost this year, right?  Seems preferable unless I'm missing something.

What problems do you foresee with replacing half at a time?  Warranty issues?  Aesthetic (you can't see both sides of the roof at once from anywhere on the ground)?  

@Jim Young

@Nathan G.

@Joe Villeneuve

I disagree with Nathan and Joe, but it would depend on your circumstances and constraints as to what I'd advocate.  For instance, how much money are you saving, and are you severely constrained with cash right now? IE what are your other options with that cash you'd be saving?

From what you've shared, it sounds like a reasonable option to replace one side.

Nathan/Joe, there were times early on when we were investing where we were very, very, cash constrained.  If we had pulled the trigger on one $7,000 roof replacement, instead of buying $50 bundle of shingles and patching, we might have been dead in the water from an operating cash perspective.  I feel that you two are making certain assumptions about Joe's constraints.  Just because you've gotten to a point where you use the 'go all the way with it' as a default heuristic, that does not make that 'right' and in fact, can lead to assumptions that lead to wrong decisions, especially for new investors who tend to have a very different mix of time and money constraints.

I have the cash to do the whole roof right now.  My hesitation is based on two things.  First, if I replace the back half right now I'll be throwing useful value into the dumpster.  If I replace it now I'll have a new roof that will be five years old in five years, vs if I replace it in five years it will be brand new then with 20 years life in front of it, if that makes sense.  The second thing is depreciation, and I know it's pennies, but I'd rather write the expense off now in 2019 dollars, rather than in future dollars which may be worth significantly less 27 years from now due to inflation.  And I guess the third thing is that even though I have the cash now I'm trying to stay as liquid as possible for future threats or opportunities as I lack trust in our current economy. 

Not really looking for blessing or permission here, just checking my understanding of repair operating expense versus replacement capital expense, and wondering if anyone else has replaced just one half of a roof for similar reasons.  Having said that, I appreciate all your feedback and input, thanks for taking the time to respond!

Ah yes, the old tax law educated roofer. 

Call your accountant- ask them. 

Having it be a repair vs cap may not have any benefit on your taxes. 

Depending on cost and how much is replaced as this "repair" it still may need to be capitalized. 

Before you spent thousands on something that will impact your taxes, get the correct answer for your specific tax circumstances from your tax pro. 

It's common for one side of a roof to wear more quickly than a different side. There's nothing wrong with just replacing the side that has more sun or wind damage. I believe that a partial roof replacement would be considered a repair but I'm not a CPA. The only
"disadvantage" to replacing just half of the roof is that if you're not doing it yourself, it may cost more. ie, xxx amount to change half then a few years later xxx amount to replace the other half may total more than doing both sides at once. However, if you get more years per $$ you'll come out ahead. More and more people in our area are going with metal roofs. Shingles only last about 15 years here in Georgia so there's more incentive than there would be in other parts of the country.

Originally posted by @Jim Goebel :

I feel that you two are making certain assumptions about Joe's constraints.  Just because you've gotten to a point where you use the 'go all the way with it' as a default heuristic, that does not make that 'right' and in fact, can lead to assumptions that lead to wrong decisions, especially for new investors who tend to have a very different mix of time and money constraints.

True. However, you're making an assumption that he's financially strapped because that's what happened to you. So we're both at fault.

People shouldn't invest and allow themselves to be financially constrained. That should be the exception, not the rule. I tell people all the time that they need to keep a reserve and never, ever use their last dime to purchase an investment.

I suppose my advice is bad for people that don't make wise investments.

 

@Nathan G.

We're in a much better position having gotten into real estate investing.  Are you saying you advise that we should have not?  Are you saying we make bad investments?  

Are you saying that anyone that doesn't go 'all the way' (whatever that means) with a project is has not made a wise investment?  Are you saying that if someone has the aptitude to figure out, as an example, that a solenoid valve is what is causing a furnace to not go consistently through its startup cycle, and the three people that come in and 2 recommend a full system replacement, and it happens that the third, (or the owner, myself, or OP) figured out the $30 part that failed early and can take the half hour to fix it, you would say that person who didn't replace the whole system for no extra value, made a bad investment?

I honestly see a lot of assumptions inherent in what you're suggesting, and readers can judge for themselves the merits of the responses on BP.  I'll leave it there.

By the way, I'm not assuming anything about the OP's situation.  I'm pointing out logical fallacies based on personal anecdotal experiences that allow for conclusions that are the result of oversimplification.

@Jim Young the most expensive part of replacing any roof is getting the roofer out of bed in the morning. The cost savings of doing the whole roof now vs half now and half in a few years is substantial.

The only reason the roofer suggested doing half now and half later is he or she wants to charge you more for two small jobs than for one large job

Originally posted by @Jim Goebel :

@Nathan G.

We're in a much better position having gotten into real estate investing.  Are you saying you advise that we should have not?  Are you saying we make bad investments?  

Are you saying that anyone that doesn't go 'all the way' (whatever that means) with a project is has not made a wise investment?  Are you saying that if someone has the aptitude to figure out, as an example, that a solenoid valve is what is causing a furnace to not go consistently through its startup cycle, and the three people that come in and 2 recommend a full system replacement, and it happens that the third, (or the owner, myself, or OP) figured out the $30 part that failed early and can take the half hour to fix it, you would say that person who didn't replace the whole system for no extra value, made a bad investment?

I honestly see a lot of assumptions inherent in what you're suggesting, and readers can judge for themselves the merits of the responses on BP.  I'll leave it there.

By the way, I'm not assuming anything about the OP's situation.  I'm pointing out logical fallacies based on personal anecdotal experiences that allow for conclusions that are the result of oversimplification.

 I've always said you can learn something from anyone, and everyone.  Until this post, I never knew that the solenoid in the furnace had anything to do with a roof replacement.

Originally posted by @Jim Goebel :

@Nathan G.

We're in a much better position having gotten into real estate investing.  Are you saying you advise that we should have not?  Are you saying we make bad investments?  

Are you saying that anyone that doesn't go 'all the way' (whatever that means) with a project is has not made a wise investment?  Are you saying that if someone has the aptitude to figure out, as an example, that a solenoid valve is what is causing a furnace to not go consistently through its startup cycle, and the three people that come in and 2 recommend a full system replacement, and it happens that the third, (or the owner, myself, or OP) figured out the $30 part that failed early and can take the half hour to fix it, you would say that person who didn't replace the whole system for no extra value, made a bad investment?

I honestly see a lot of assumptions inherent in what you're suggesting, and readers can judge for themselves the merits of the responses on BP.  I'll leave it there.

By the way, I'm not assuming anything about the OP's situation.  I'm pointing out logical fallacies based on personal anecdotal experiences that allow for conclusions that are the result of oversimplification.

Wow. I would say you're taking this far too seriously. He asked if he should patch he roof or replace it. I recommended replacing it. Don't read so much into things.


 

@Joe Villeneuve

The point is some projects justify a full replacement, and some do not.  While 'most' of the time it may make sense to pull the trigger on a full roof replacement (or perhaps a furnace replacement) all at once, it will depend on the circumstances.  I think it's not wise to advocate always doing so, for multiple reasons, a few already pointed out.

I can come up with specific circumstances where we can all agree a full furnace replacement wouldn't make sense and I can also come up with specific circumstances where a full roof replacement wouldn't make sense.

@Jim Young

With the above said, it seems you stated that most of the roof is towards the end of its life.  If operating capital is not of a primary concern/constraint, then I think you're right to consider tax treatments of a partial vs. full solution.  I can't speak to that but I'd think that's a secondary consideration to the below (at least how I'd approach it, anyways).

I think since cash/operating capital is not a primary consideration, it is good to consider that a good chunk of the costs (and therefore price) associated with a project like this is getting the crew mobilized to do the work, and you may end up 'double paying' for some of that.

The other consideration I can think of against doing the half roof is just the shingle matching aspect.  Even though you stated that you can't see both at once, if they aren't a perfect match, you get into the aesthetic look over time that just might look 'patched together.'  Even the difference in age may make the weathering look different for the different parts of the roof.  This may affect your asset's ability to hold value (real or perceived) over time, perhaps (low risk) for appraisals for refinances, etc - but (higher risk) during a more in depth diligence/inspection when you're selling.

Just yesterday I watched a live stream on BP discussing tax strategies for Real estate investors, and I am not sure if someone has mentioned this already in this thread but there is a new tax break called Bonus depreciation which allows you to claim the full amount of the roof being replaced in one go , not having to depreciate it as we normally would over 27 years. Look into it, this was news to me. It may only apply to investment property and if anyone knows more about this in detail please comment. But it looks like your timing for a new roof might be perfect! It's worth looking into in any case. Under prior law, you could only use bonus depreciation for new property. The Tax Cuts and Jobs Act has changed that rule and now you can use bonus depreciation for purchases of new or used property starting in 2018.. And you can claim 100% of the bonus depreciation ( used to be 50% or less I think) on qualified property. 

@Jim Young

I'm not about to get beat up again by the tax people on this. But as far as replacing half of a simple gable/peaked roof shape instead of all of it, it's very common out here in western Pennsylvania. As @Jim Goebel s put it, there are multiple scenarios when it makes more sense to replace the whole roof. @John Teachout also makes a great point in his post here about metal roofs. But let me get into the weeds on this one a bit, because it's worth doing it. You mention "value in the dumpster." That's what I really think is most important to consider here.

Typically, on a a simple gable roof with two equal slopes, homeowners who rely on contractors to take care of their roofing problems will re-roof multiple times, laying down two (or three) layers of shingles, before they bite the bullet and tear off all the old shingles to reroof. Many if not most will typically choose to add an extra layer of shingles over the whole roof rather than attempt roof repair on the problem area. This is both because they do not understand roof repair and also because roofing outfits push them into it to drive up their profits. If a tile guy told you that you had to replace an entire tile floor because two tiles cracked you'd laugh at him. But nobody's up on the roof with the roofer, so when he comes down and puts on a serious face and tells a homeowner that an entire roof is shot, the homeowner will, nine times out of ten, nod along and help the roofer knock out his own mortgage for the month.

So what you end up with when you buy an elderly property here in western PA is often a roof with two layers of shingles, one side with one good layer over a primary layer that's still good, and one side with two somewhat beat up layers. Neither the good nor the beat-up layers have ever seen any significant preventative maintenance attempts.

You look at the "bad side" and you realize that one square, 10x10 feet, on the more heavily-worn side is the only real problem. Maybe it's the place where the idiot former homeowners never trimmed back the tree overhanging the roof. You may even find it's just a really simple problem in a very limited area (like 2x1 feet) that has to do with improper chimney flashing (this happens with extraordinary frequency here).

With any sort of competent preventative maintenance efforts, the "good side" is easily going to last you the twenty years you're going to hold this property in your portfolio. You would hold off reroofing until you can sell the property individually with "new roof!" mentioned prominently in the listing. The "bad side" of the roof might only require you to fix the chimney flashing or slap on some good roofing compound over a small area or pull off and replace a few three-tab shingles, or even just glue down some loose shingles with sealant to get three or four more years out of the "bad side." And of course, after those years are done, up you go again and work on that roof some more, and you get a few more years out of it. These are all realities that will not occur to the average scared-of-my-own-property homeowner or the hands-off-don't-want-to-know landlord.

So, Jim, I would invest in multiple opinions in what's wrong with your roof. How do you really know the former roofing contractor just didn't do a crap job putting in the ridge cap (which I suspect is actually a one-piece ridge vent)? It happens all the time. How do you really know the entire side has gone "bad" just because it faces the sun? It may have two problem areas and that's it. How many layers do you have on that townhouse roof? The depreciation and repair questions are important, no doubt, but you don't need to spend money you don't need to spend. Roofing contractors will almost always try to push you into some form of reroofing, partial or full. That's where the money is. But you may really only just need someone to redo the roof vent right this time, replace three or four three-tab shingles, spread some compound on the flashing, and glue down a couple more shingles. Five to six more years or value that isn't going into the dumpster.

Originally posted by @Joe Villeneuve :
Originally posted by @Jim Goebel:

@Nathan G.

We're in a much better position having gotten into real estate investing.  Are you saying you advise that we should have not?  Are you saying we make bad investments?  

Are you saying that anyone that doesn't go 'all the way' (whatever that means) with a project is has not made a wise investment?  Are you saying that if someone has the aptitude to figure out, as an example, that a solenoid valve is what is causing a furnace to not go consistently through its startup cycle, and the three people that come in and 2 recommend a full system replacement, and it happens that the third, (or the owner, myself, or OP) figured out the $30 part that failed early and can take the half hour to fix it, you would say that person who didn't replace the whole system for no extra value, made a bad investment?

I honestly see a lot of assumptions inherent in what you're suggesting, and readers can judge for themselves the merits of the responses on BP.  I'll leave it there.

By the way, I'm not assuming anything about the OP's situation.  I'm pointing out logical fallacies based on personal anecdotal experiences that allow for conclusions that are the result of oversimplification.

 I've always said you can learn something from anyone, and everyone.  Until this post, I never knew that the solenoid in the furnace had anything to do with a roof replacement.

This is not the first time I've seen you try to put somebody down for actually knowing what he's talking about, Joe.

 

Half these roofers want to replace freaking every roof they see. It’s insane how often they tell you needs a full replacement. 

There are plenty of times you can just patch and fix the chimney flashing (very common). Most roofers will never tell you that tho.


Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here