By Ernest Dellinger
Having purchased and sold real estate property for over 40 years, managed rental property for nearly 30, and being a former building inspector myself, I’d like to share with you some tips to make your Real Estate Investment portfolio better. Specifically, investors need to better understand the Building Permit process and the benefits of sticking to a licensed contractor.
Permits
Each city or municipality has a Department of Building and Safety, which has the responsibility of issuing permits and enforcing and interpreting building codes. The codes are mainly the same from city to city, however, interpretations may vary. You don’t have to go it alone—Plan Check Engineers and Inspectors can be a valuable source of information on code issues in your city.
Permits As Public Record
Did you know that permits are public record? If you look up your or anybody else’s permit you’ll be able to find the owner’s name, the contractor’s name, and the type of work that is going to be done. It also shows when the project was approved, the date of the inspector’s final inspection approval, and the completion date. Knowing which types of projects have been approved in the past will help you build your dream project in the future.
Verification
Inspections insure that any work complies with the current Building, Electrical, Mechanical, and/or Plumbing Codes for the city or jurisdiction where the property is located. The cost of most inspections is included in the cost of the permit. When Deputy Inspectors or an afterhours inspection is needed, then these costs will be added on top of the existing permit cost.
What Does the Inspector Check?
The inspector determines from the plans that the project is in the right place and has the required clearance from property lines, other buildings, and utilities like gas or power lines. The inspector also can verify that the project is being built with the proper materials in the correct way to insure it will be safe for you and your family. For example, at least one window in each bedroom must be large enough for a person to escape in case of an emergency such as a fire.
Liability
Permitted construction limits your liability as an owner, while unpermitted construction may void insurance claims in the event of a loss. When you are ready to sell the property, unpermitted construction may cause expense to bring the unpermitted area up to code at the time of sale or result in a discounted sale price if the buyer is willing to pursue the purchase.
Unpermitted Construction
When discovered, unpermitted construction will result in an attempt to become permitted or torn down. There are several things that have to be done that are more restrictive than if the project had been permitted. Some demolition will be required so that the framing, rough plumbing, mechanical and electrical, insulation, and roof sheathing may be inspected. Drywall replacement and inspection will be required as well. Keep in mind that the more restrictive building codes at the time of sale will be met rather than when the codes in effect when project was built originally. The result of unpermitted construction is additional expense over permitted construction. The expenses of material, labor, demolition, reconstruction, and permits will be added to the original cost of construction if future codes will even allow the project to be permitted and rebuilt. In other words, unpermitted construction is a high stakes gamble with quality control and with poor odds.
I would suggest that a permit is the best way to insure the investment you make. It will pay off when you sell the property because it maximizes the selling price while minimizing your expenses.
