Turning NYC Real Estate Challenges into Profitable Deals:

[Michael Genari]

How Permits & Violations Can Work in Your Favor:

Investing in NYC real estate is never simple, and properties with violations, open permits, or zoning issues may seem like a headache. But here’s the good news—for savvy investors, these “problem properties” often present the best opportunities for negotiation and profit.

Many buyers walk away from deals when they see compliance issues, but those who understand how to navigate them can secure properties at a fraction of market value. Here’s how to turn a property with violations into a high-return investment.

1. Why Violations & Open Permits Are a Golden Opportunity 💰

Most buyers panic when they see issues like Stop Work Orders, Work Without a Permit violations, or zoning conflicts—but these challenges can be your biggest advantage.

✅ Sellers Are Motivated to Close Quickly – Properties with violations scare off traditional buyers, so sellers often slash prices just to get the deal done.
✅ Leverage for a Lower Purchase Price – You can negotiate major discounts by factoring in the cost of resolving violations.
✅ Escrow Deals Can Keep Deals Moving – Many sellers will agree to put funds into escrow to cover compliance costs post-closing.
✅ Cash Buyers Have the Upper Hand – If financing is difficult due to violations, cash buyers control the negotiation and can secure massive discounts.

📌 The Reality: Violations don’t mean a property is worthless—it means most buyers don’t know how to handle them. That’s where you can step in and profit.

🚨 Red Flag:
❌ Skipping Due Diligence – Never assume a violation is “minor.” Get a permit expediter & architect to assess the real cost of bringing the building into compliance before closing.

2. How to Negotiate a Property with Violations Like a Pro 🏗️

If a property has compliance issues, use it as a bargaining tool to get the best deal possible.

🔹 Option 1: Secure a Deep Discount & Take Control
If the seller is unwilling to fix the violations, cash buyers have maximum leverage. By demonstrating the challenges of financing, you can demand a steep price reduction—often 10-30% below market value.

🔹 Option 2: Have the Seller Fund Escrow for Compliance
Many sellers will agree to set aside funds in escrow at closing, which can then be used to:
✅ Pay for violation removal & permit approvals
✅ Cover contractor & architect fees
✅ Resolve Stop Work Orders or zoning issues

🔹 Option 3: Work with the Seller to Fix Issues Pre-Closing
If the seller wants to maximize their price, they may be open to:
✅ Hiring an expediter to clear violations before closing
✅ Bringing in an architect to legalize any unapproved work
✅ Filing missing permits so financing won’t be an issue

📌 Investor Insight: A property without violations is worth more, so in some cases, sellers will invest in compliance fixes before closing if it means getting a higher price.

🚨 Red Flag:
❌ Assuming sellers will fix everything for you – Always get written agreements for any compliance-related promises before finalizing a deal.

3. The Fastest Way to Resolve Violations & Increase Property Value ✅

Once you secure the property, the next step is clearing violations and permits quickly to unlock its full potential.

✅ Hire an Expediter – Navigating NYC’s DOB, FDNY, and HPD systems alone can take months. An expediter can fast-track approvals & paperwork.
✅ Get an Architect to Draft Corrective Plans – Some violations require official drawings & filings before they can be resolved.
✅ Schedule DOB Inspections & Close Open Permits – A property cannot be refinanced or sold at full value until all permits are legally closed.
✅ Use Compliance Work to Justify Higher Rents or Resale Prices – A newly compliant building can attract better tenants and buyers.

📌 The Payoff: Investors who take control of the compliance process can transform a distressed building into a fully legal, financeable, and high-value property.

🚨 Red Flag:
❌ Waiting too long to start compliance work – Delays can cost you more in fines and missed opportunities.

4. The Endgame: Refinancing, Renting, or Selling for Maximum Profit 💵

Once the property is fully compliant, your options expand dramatically.

✅ Refinance at a Higher Valuation – Banks will now finance the property, offering better loan terms and cash-out options.
✅ Lease to Stronger Tenants at Market Rates – Previously illegal or vacant units can now be rented legally.
✅ Sell at a Premium – With all violations cleared, your building is now appealing to institutional investors and conventional buyers.

📌 Big Picture: The key to profiting from distressed properties is knowing that the barriers to entry are temporary—once resolved, the property can compete at full market value.

🚨 Red Flag:
❌ Selling before full compliance – Buyers will use violations to negotiate against you unless everything is legally resolved.

Final Thoughts: Smart Investors See Challenges as Opportunities

While most buyers avoid properties with violations, open permits, or zoning issues, experienced investors see them as a path to profit.

🏗️ The most undervalued properties aren’t always the ones that look bad—they’re the ones that others are too afraid to buy.

By using compliance issues as a negotiation tool, working with the right experts, and resolving violations efficiently, you can acquire high-value real estate at below-market prices.

💬 Have you ever bought a property with violations? How did it impact the deal? Let’s discuss! 👇👇