Multifamily Investing in NYC: How to Profit from Properties with Permit & Violations

[Michael Genari]

Investing in multifamily properties and apartment buildings in NYC can be incredibly lucrative—but only if you know how to navigate permits, violations, and compliance challenges.

Many investors shy away from buildings with open violations, expired permits, or illegal units, but those who understand the process can buy undervalued properties, resolve issues efficiently, and maximize cash flow.

Here’s how to turn a distressed multifamily property into a profitable asset while avoiding costly delays and legal headaches.

Step 1: Target Underpriced Properties with Violations 🏢💰

Most investors look for turnkey properties, but competition drives up prices. Instead, find buildings with compliance issues, such as:

✅ Open DOB Violations – Work Without a Permit, egress issues, or fire safety non-compliance.
✅ Stop Work Orders (SWO) – Construction was halted due to unsafe conditions.
✅ Vacate Orders – Tenants were forced out due to safety violations.
✅ Illegal Units or Alterations – Unapproved conversions or missing permits for renovations.
✅ Expired Permits – Work started but was never officially closed out.

📌 Why This Strategy Works:
Sellers lose leverage when a property has unresolved compliance issues. Cash buyers who can fix violations quickly can negotiate steep discounts—often below market value.

🚨 Red Flag:
❌ Severe structural damage or zoning issues – Some violations are too costly or difficult to fix. Always consult an architect or expediter before making an offer.

Step 2: Conduct a Full Violation & Permit Search 📋

Before buying, research all open violations & permit issues.

✅ Check DOB NOW & BIS Systems – Look up the property’s compliance history.
✅ Review ECB (Environmental Control Board) Fines – Some violations carry daily penalties.
✅ Look for HPD (Housing Preservation & Development) Violations – If the building has tenant complaints, HPD may have issued orders for repairs.
✅ Assess FDNY Fire Code Violations – Missing sprinklers, blocked exits, or outdated fire alarms can delay approvals.

📌 How to Speed Up the Process:
Working with a permit expediter can help clear violations faster, making it easier to close deals and begin renovations sooner.

🚨 Red Flag:
❌ Buildings with pending lawsuits – Some compliance issues involve legal disputes with the city or tenants.

Step 3: Close the Deal & Start the Legalization Process 🏗️

Once you acquire the property, the first priority is to resolve violations and legalize any unapproved work.

✅ Hire an Architect – Architectural plans must be submitted to the DOB for any structural changes.
✅ Expedite Permit Filings – New permits may be required to bring illegal units, extensions, or renovations up to code.
✅ Negotiate Fines & Penalties – Some ECB fines can be reduced or dismissed if corrections are made quickly.
✅ Apply for Variances (If Needed) – If the building doesn’t comply with current zoning laws, a zoning variance may be required.

📌 Why Speed Matters:
Multifamily buildings with violations cannot be refinanced or sold easily until compliance issues are resolved.

🚨 Red Flag:
❌ Delaying compliance work = higher penalties – NYC charges escalating fines for unresolved violations.

Step 4: Renovate & Ensure Full Compliance 🔨

Once permits are approved, it’s time to start construction and bring the building up to code.

✅ Address Safety Issues First – Fire alarms, sprinklers, and structural stability must meet DOB & FDNY regulations.
✅ Schedule DOB Inspections – Plumbing, electrical, and mechanical work require multiple approvals before closing permits.
✅ Comply with HPD Housing Regulations – If the building has rent-controlled or rent-stabilized tenants, ensure all renovations follow tenant protection laws.

📌 Smart Strategy:
Renovating to increase unit count (legally) can boost cash flow while fixing violations.

🚨 Red Flag:
❌ Unauthorized tenant evictions – Rent laws in NYC heavily protect tenants, and improper removals can lead to legal trouble.

Step 5: Close Permits, Remove Violations & Secure a Letter of Completion✅

Once the work is done, the final step is closing out permits & obtaining a Letter of Completion.

✅ Final DOB Inspections – To ensure all corrections meet code.
✅ Clear Violations from City Records – DOB, HPD, and ECB must officially dismiss violations.
✅ Obtain a Letter of Completion – This proves the building is fully compliant and legally occupied.

📌 Why This is Critical:
Unresolved violations = major financing & resale issues. Many banks won’t approve loans on properties with active violations.

🚨 Red Flag:
❌ Selling before violations are cleared – Buyers will demand price reductions or walk away if the property isn’t compliant.

Step 6: Refinance or Sell at a Higher Value 💰

With all violations cleared and the building fully compliant, you now have several exit strategies:

✅ Refinance at a Higher Appraisal – Now that the property meets code, banks will lend at better terms.
✅ Sell to Institutional Buyers – Investors avoid buildings with compliance issues, so fixing violations expands the buyer pool.
✅ Increase Rents & Stabilize Cash Flow – If units were previously illegal or vacant due to violations, now they can be leased legally.

📌 Pro Tip:
Properties that were once “unsellable” become prime investment opportunities once violations are cleared.

Is Investing in NYC Multifamily Properties with Violations Worth It?

✅ Yes—If You Know How to Fix the Issues.
Investors who understand NYC’s permit & compliance process can acquire properties below market value and create massive equity.

✅ Yes—If You Have the Right Team.
An architect, permit expediter, and zoning expert can speed up approvals and prevent delays.

❌ No—If You Don’t Have the Time or Expertise.
If you don’t know how to clear violations or navigate the DOB, you risk costly delays and legal battles.

Final Thoughts

Investing in multifamily properties with compliance issues is not for beginners, but for those who understand NYC’s real estate laws, permitting process, and violation removals, it can be an opportunity to buy low, fix smart, and sell high.

🏗️ Fix the problems others avoid, and you’ll find the deals they never see.

💬 Have you ever bought a multifamily property with violations? What was your experience? Drop your thoughts below! 👇👇