For property owners, it is vital to protect the value of their property during the last few years of ownership. Lack of proper roof maintenance can often jeopardize the sale value.
Picture the following scenario. You bought a commercial building a few years ago and you are now ready to finally sell it and cash in the reward after years of paying back loans. Shortly after you arranged for your property to be valued, you get the shock of your life to find out its value is much lower than you expected. The reason: when the new buyer reviews your books, she significantly reduces the income from the property. The buyer thinks that your building's 'net operating income' (NOI) is in fact lower than the one you were tracking.
It is very common for commercial property owners to consider roofing expenses within the 'replacement reserves' - an accounting reserve meant for maintenance capital expenses - and to entirely forget their impact on valuation. However, when a new buyer evaluates the building, she’ll look very closely at the replacement reserves and, often, include them within the NOI. This often results in lower NOIs, and, consequently, unexpectedly lower valuation. In short, roof repairs or partial replacement during the last few years prior to the sale can unexpectedly affect the valuation.
On the other hand, ignoring the roofing problems and postponing the repairs can affect the cap rate. New investors will apply the market cap rate only when the building has been properly maintained. Think of it this way – buyers know the market cap rate and the required conditions to earn it. Why would an investor buy at the market cap rate, when your building will require re-roofing in a year or two?
Therefore, either an increase in roofing costs will reduce the NOI or a roof left unmonitored will depress the cap rate. Both will cause your property value to decrease. Left unmonitored for long time, your roof might cost you a significant share of the building’s value.
Roofing costs are one of the major unexpected property maintenance expenses, because leaks can often happen without warning, as a result of a bad winter or a storm and a poorly maintained roof. This doesn’t only harm the property’s valuation but could affect also the timing of your sale to allow for the repair process to occur.
How can we help you? You can control roofing costs and optimize repairs over time to contain these expenses, while preserving the market cap rate for your building.
Potluck Energy uses proprietary sensors to monitor your roof for leaks and damages, and proprietary algorithms to intervene before any major re-roofing is required. Our roof sensor sheet requires no major installation work and can be installed in less than a day to give you the peace of mind about your roof.
If that isn’t enough of an incentive this technology allows you to even monetize your roof. While securing the roof, we will match your roof with a solar developers that will lease the space from you to produce solar electricity.
To get started, you can send us information about your roof for a free assessment today.