I hear this all the time, “I put in a new roof for
$8,000. Did my property value go up by $8k?”
Question: So what is a new roof really worth?
Hint: everything and nothing.
Nope. Not one dime. Not one nickel. Not even a penny
(even though it’s no longer in use in Canada!)
People expect that when they buy a house, the windows are
sealed, the roof doesn’t leak, the toilets work, the furnace warms the home… They
pay 0 extra for the basics.
In a way, it’s normal; in a way, crazy.
Rich Danby said at a recent REIN event told his audience: people will pay an extra $50k because he and his team of renovators installed a coffered
ceiling in the living room of a home they bought to flip, painted the outside of the house, planted a few flowers, then sanded and re-stained the hardwood.
The market is always right, even when it’s wrong! In fact, it only pays for “lipstick”.
That’s why I’m so big on differentiated value, DV (as long as
it is not too expensive) like a garage office, frontyard parking, backyard
games, basement suite, tech package, 0-step entry, etc etc. This is what the
market values. Plus the purely cosmetic stuff that Rich preaches. It doesn’t make any sense to me since I’m an engineer and like it when the plumbing works, but Rich is right about this.
However, professional investors have an advantage in that they ARE NOT
They value the basics a lot because they realize the very real cost of all that deferred
That’s why professional investors who use the Warren Buffett
approach to real estate are making a killing.
They buy properties where the
basics are ok or where they can get a price abatement and make them ok.
also know how to add the Bruce Firestone DV/animations and Rich Danby
lipstick so that they can derive value from all the work they’ve done (including making sure all the home’s systems are working optimally).
Lastly, since they are not buying
and flipping but using a buy/hold/animate/differentiate/add lipstick/refinance/do it again model, even if they have a modest cost overrun, it’ll mean almost nothing
over the 10-15-40+ years they or their families own the place…
How do you think Minto ended up with a residential portfolio of 34,000 mortgage-free doors in Ottawa, Toronto and Florida? By buying and flipping? By ignoring or deferring maintenance? Nope. They used Warren Buffett’s methodology before Warren did.
@ profbruce @ quantum_entity
postscript: an architect once famously said, “If you want to know the fastest way to destroy any building, cut an 18 inch square hole in its roof, and stand back.”
He was right.
Once you let weather, vermin and nature into your building (especially in a cold weather place like Canada where temperatures typically range from -30 degrees Celsius to +30), it won’t be long til it’s worth a negative number.
Negative because of the non-negligible cost of demolishing the building plus carting away the debris.
So, again, what’s a new roof worth?
Nothing and everything.
postscript 2: thanks to coaching candidate Belinda for asking me this question!
postscript 3: here’s a note from a successful roofer that I coach on this post–
Resources from the NRCA (national roofing contractors
association) say a new roof adds 3-4% to your property’s value, when you have a professionally-installed
That means for a $300,000 townhome, it would add around $9,000 to its value. The average roof cost for a townhome in Ottawa is $5-7k.
Meanwhile, larger homes get even more value–for a $1m home, 3% = $30k, while it may only
cost $20k for the roof.
Old homes will have more expensive roofing repair/replacement costs since they often have poor insulation, roof decking or flashing details. Homes 30 yrs and
newer will be pretty straight forward with no
The roof is something that will scare people away as it
protects those nice coffered ceilings and crown mouldings. And yes, if it does have
a new one, there may not be much added value, but it will certainly avoid lost
value, delay in terms of selling it and lost buyers if it’s ever put up for
Lastly don’t go cheap. Even though it is not something you
can use and enjoy everyday like a kitchen reno, it
is a critical part of your building. It’s cheaper to pay for it now and have it
least 30-50 years, rather than have to do it twice in 20 years due to poor workmanship or too small a scope of work.
Mike Montone, Firon Roofing founder, 613-821-6222 (office) 613-897-7712 (cell) fironroofing.ca firstname.lastname@example.org