Bad roof install. Rental house. I'm waffling.

HardDrive · 02-04-2012, 12:32 PM

We are looking at an investment home. POS that has been on the market like 500+ days. I figured the house was worse than it looked, and the owners were difficult, but dear lord...

The place was advertised as having a 'new roof in the past year'.

Great. Except that on inspection, it turns out they paid a non pro to do the roof. Laughable mistakes. I got 2 roofing guys to look at it. One said he could repair it for $1500. The other guy said he wouldn't repair it, and wanted to do a full replacement. He explained that he wasn't being greedy, he simply had no faith in the way the underlayment was done. He said he couldn't guarantee the roof wouldn't leak.

The agent (of course) wants it to go through.

I'm ready to walk. You can repair faulty details, but that isn't going to matter if the underlayment was done wrong. Moreover, I'm a bit pissed that the sellers clearly had some knowledge of these issues.(Side sewer was messed up, thats being addressed.)

But, but.....the house is a deal. If the roof is bad, it less of a deal. Foundation is solid. Good bones. The location is fantastic for a rental. Quick access to the local university, freeways, walkable area, very close shopping, public transport.....

New roof would be $13k. Accepted bid was $262k

Whats your gut reaction?

Erakad · Erakad's Garage

My gut reaction is to drop it another $13K, but then, if it's already way under market, who knows.

Mark Henry · 02-04-2012, 12:41 PM

My gut would say "what else?"

Erakad · Erakad's Garage

Quote:

My gut would say "what else?"

Yea, if it's not screaming "buy me", may just want to walk

gshase · 02-04-2012, 01:19 PM

Accepted bid was $262k. Is there any profit to be made? One of my rent houses was 30k and rents for $900/month.

john70t · 02-04-2012, 01:20 PM

Depends on what a "deal" it is......$25K below average market? $100K? More?
Is the property in an economically-stable location which will only increase by tens of thousands in value over time?
Sounds like it.

If so, the roof is a petty issue. Might even be a good time to put on a metal roof. Put up a fuss, and ask the seller for concessions to split the cost. After 500 days, they want out from taxes at this point.

Before you leap....
Why hasen't it already been jumped on if it is such a deal?
Is there something else the realtor community knows and you don't? Nuclear waste neighborhood? City planning on building a freeway through the block? Black mold killed occupancy permits?

Get a more thorough inspection, or two. They may be covering up other defects.

LWJ · 02-04-2012, 01:29 PM

I am down to one duplex but used to have a number of places. I know and work with a bunch of roofers. I suspect you can get a high quality roof at a lower cost than 13K. Seattle can't be that much higher than Portland for labor. I last paid 6k for a full tear off on a one story 1600 sq foot rancher. That was a few years ago. They replaced some rotten plywood for this cost as well. Top notch job. Legit roofer.

Larry

Dantilla · 02-04-2012, 02:28 PM

Real Estate is on sale. 262k sounds very high for a rental in today's market, but I'm not in downtown Seattle.

I've recently bid on a few auctioned homes, and want to stay below 100k. Last one I bid on was near a college campus and top bid was 63,000. I would have bid over that until I read in the fine print a requirement for the buyer to use it as primary residence for at least a year.

Structurally sound, great location, but the electrical system was a mess. I tested several outlets, and only two of them were wired properly. The rest had open grounds, or were wired backwards. Add a few thousand bucks to re-wire it, and it still would have been a great deal.

A couple years ago, this home would have easily been somewhere North of $250,000.

azasadny · azasadny's Garage

I would be thinking "what else is screwed up"? and walk...

SeanPizzle · 02-04-2012, 05:09 PM

A good rental will be priced at about 9-11x annual rents flow, according to standards I have read. That property would need to rent for just shy of $2k for it to make sense.

turbo6bar · 02-04-2012, 05:44 PM

Quote:

Originally Posted by HardDrive

But, but.....the house is a deal. If the roof is bad, it less of a deal. Foundation is solid. Good bones. The location is fantastic for a rental. Quick access to the local university, freeways, walkable area, very close shopping, public transport.....

New roof would be $13k. Accepted bid was $262k

Whats your gut reaction?

How much less of a deal is it really?

If the bad roof is the primary objection, drop your bid by $13k and get a letter from the roofer to justify your move. Or, have the seller replace the roof and roll the expense into new financing versus your coming out of pocket.

Do NOT get attached to this house. It's just a house. The decision should be based on numbers. If you don't trust the condition of the home, gain information, form a dollar basis, and adjust the 'numbers.' Voila. The decision becomes simpler.
good luck, jurgen

HardDrive · 02-04-2012, 07:23 PM

I got another opinion on the roof from a trusted contractor. He thinks repair is no problem.

There is a long list of things wrong with the house that I plan to correct myself. As it stands now, the owners have already agreed to another $3500 off, so we are now at $259k.

The comparables in the area are very good. There are houses above $500k within 1 block. The area is not only solid, but seems to be improving. Its starting to develop a nice little village area thats only a block away.