Curious on this board's thoughts on payback period for a personal capital expenditure.

I've had a wood shake roof on my house since we purchased it. It's always been difficult and expensive to insure. We've only had one carrier that would insure it, and it's close to double the cost of a similar house with a regular roof. It also locks our cars to the same carrier because of bundling, and our auto is more than it could be elsewhere. We've held out, hoping for a hailstorm, but no luck.

Our policies skyrocketed this year, like everyone else's. If we replaced the roof, we'd save over $4k per year. With that kind of savings, the roof will pay for itself in a little over 5 years**. I went ahead and bit the bullet and put a new one on and I'm glad I did. But I couldn't find good, consistent information on what's considered a "good" payback period for personal assets, so I'm curious what others would consider the right level. I think a near 20% return is worth it, not to mention a lot more flexibility.

** - I also calculated if the initial amount was invested vs investing the annual savings, and the payback period is closer to 8 years with an 8% return. Still good with that, personally.

Do you expect to be in the house 8+ years?

If not, does replacing the roof likely improve value upon selling?

Seems like you are approaching it sensibly. Timeline is a bit long for a slam dunk, but there longer you stay there the more you'll wish you did it sooner.

Good thoughts.

We do expect to be here for longer than 8 years.

It does improve the ability to sell a home in this market - often times it's become a sticking point for sellers, and you're even starting to see them get replaced when they are sold - assuming this is negotiated into the sale. So theoretically, the payback period if you sell the home is much shorter if not near 0.

I'm not sure we waited too long - the gap has just widened more and more between non-wood and wood roofs. This year was a big jump for everyone, but doubling a policy that was already expensive is just that much higher. I'm pretty sure the carrier really doesn't want them on the books anymore. I'd expect that gap to continue to widen.

I've spent some time with some pretty sophisticated commercial real estate investors/owners- their house rule was 7yrs. So my rule is 7yrs.

Edit: disregard, just realized you already replaced. With a payback of 5 years I probably would have as well.

I'd wager the "savings" on insurance will decrease every year, FWIW. For example, we just bought a house and the disclosure said the roof was a year old. The insurance company asked for the date and contractor, well it was actually 2 years old. Just that 1 extra year caused the insurance premium to go up like $150.

Other thought, since you're already talking about replacing the roof out of pocket what would the savings be if you kept the roof but changed your policy to a higher deductible for the roof or depreciated replacement cost?

You could be right on the annual increase, but I would bet money the annual increase of our wood shake would out-pace it. If a non-wood roof went up $100 a year, ours went up $200. This year was a killer ($2300 increase on the roof, and $1400 on 2 cars!).

Interestingly, we could only get a depreciated replacement cost plan. And only 1% deductible or greater. And the insurer had a calculation for our home value that put it $150k over market value, so the deductible was getting pretty pricey. To be fair, I never checked a 2 or 3% deductible, but I'm sure it would be painful if you ever had to replace it. Our insurance company had us by the calf fries.