by Howard Glowinski
Well maintained capital items on multi-unit properties will boost cash on cash returns! This article will set out a number of reasons that your roof should be considered a profit centre and not simply a cost centre.
1.) Problems found on due diligence inspections lower your cost of acquisitions.
2.) Money invested in your roofing system might be eligible for inclusion in a rent review submission for capital items to raise rents forever!
3.) Cellular providers will pay to rent roof areas to mount antennas and other equipment.
4.) Well maintained roofs will defer some brick restoration problems and save further outlays for other capital items.
Due Diligence Inspections
A thorough inspection of a roofing system will enable purchasers (and vendors) to accurately assess this important capital item. A visual inspection of the corridors, mechanical rooms, stairwell and one or more penthouse apartments is required. The estimated remaining useful life of the roof membrane can be assessed by your professional contractor.
Roof replacement or repair budgets can be prepared to aid in final negotiations of purchase price. It has been this author’s experience that CMHC will review a property detailed inspection report to ADJUST mortgage holdbacks on mortgage applications.
Rent Review Submissions
There is opportunity on some properties, to recover cash invested in your roofing system through capital recoveries permitted under the Tenant Protection Act. Any recoveries permitted will increase rents forever! The recovery would be greater on a roof replacement than on a cash expended on repairs and maintenance.
Many high rise buildings have roof mounted cellular antennas and equipment. A thorough examination of the roof system should be done prior to signing a rental agreement or lease renewal. There are significant additional costs involved with roofing, repairs or replacement, underneath steel beams, cable trays and cellular equipment shelters. It is prudent to assess the condition of the roof system before mounting and installing equipment so that it is properly apportioned. Cellular providers must be actively involved in any roofing repairs that may alter the alignment of antennas or involve the moving of cables.
The roof is one of many interdependent capital items in a multi-unit building. Such diverse equipment as boiler vents, plumbing stacks, storm drains, exhaust fans (for common areas) and elevators often penetrate roofing systems. The ongoing protection of the roofing system around each of these items is critical to ensure the long term performance and reliability of these other interdependent capital items. For example, prolonged roof leaks at boiler vent can rust out the heat exchange.
The weakest detail on roofing systems is often at vertical upturns or penetrations. Some of these problems can be difficult to detect and may also not immediately appear to be related to roofing systems. There are many buildings that exhibit brick problems at or near the top of walls or at connections to concrete floor slabs. These brick problems can sometimes be traced to deficiencies with roofing upturns at roof edges (on perimeter, stairwell or mechanical penthouse walls).
The roof area is often used as a working platform for different construction trades including restoration, painters, window washers, metal cladding and others. The safe installation of working platforms require outriggers and cables to be secured to anchors mounted through the roof. It is critical that these other contractors protect the roofing system from damage howsoever required. A short site meeting with all contractors, including your professional roofing contractor can often prevent damage to the roofing system.
There is a significant investment in your roof and related building components. There are also opportunities to profit from an investment in your roof system. Regular inspections and timely attention to problems can lead to greater cash on cash returns.