To Permit or Not to Permit

Is there such a thing to go the wrong way with this concept of getting the permits done or not getting them done? We’ll go over the pros and cons to both and what you should be doing on your homes in the eye of the beholder and the city in regard to laws. This has been a long-debated concept and there are investors that will tell you all different ways they do it.

In any house when it was built it had to go through the process of getting building permits, an inspector coming out to the property to confirm it is done right, and then the city signing off the completion of the build. This is normally how it goes, and the permit process for a new home can take up to 12 months to get done on average. The approval process can be shorter or longer, but this is a good base. This process is the longest part of the building process, all the rest is fairly quick.

Permits Pros

To get the L word out of the way, it is going to cover the liability aspect of your home and repairs. This means that the home is done within the letter of the law per the standards that the city has provided due to updated building code and safety standards. If the case were to happen that the house burned down and the cause led back to the remodel, you would not be covered legally, and your insurance will not cover you as well. It is your protection as a homeowner or investor.

The city cannot slow you down or stop you while doing the remodel as long as you are following the permits and blueprints to the exact print that the city approved. This is a huge pro because you can really be able to finish quickly once the permits are approved. There are times the city can stop you while building and this gives you a green light knowing that this is something that was already done.

During the process the city may give you updates on new standards that they will impose, and if you did not do the permits you will not know that which could tie your construction up for longer periods because of not knowing the rules/laws.

When you go to list the home, apartment, or condo you have the right to show that it was permitted through the city which is great for appraisal value, resale value and rental value. For instance, if you turn a 2bed/1bath into a 3bed/1bath the rent will be higher for the extra bedroom that it would if it was staying as a 2bed/1bath. Take this as the opportunity to value add a property that other people see as not a good property to purchase.

Permit Cons

The other side of being covered on insurance and legally while something tragic happens at a property is not going to happen. This means that if a fire or anything else happens injuring someone or killing them that means the owner is on the hook for that situation. This is if the property is fixed up and there are not permits drawn by the owner through the city to do the work. The owner is leaving a lot of the line without doing the permits just to save some money and time for the property.

If there are not permits drawn by the owner, and the city is contacted by someone that notices the property being repairs/fixed up (neighbor, or city inspector driving by) then the work can be halted until the permits are completed to get the work done. This can slow the project down by four to twelve weeks. There have been times some of our contractors have been doing work for another client, the neighbor sees the work and contacts the city to inform them that it is unpermitted work. This happens a lot in condo communities and 55+ communities where there are strict HOAs.

As a project manager, owner, contractor, and builder you may be too busy to take a look at new upcoming codes for the city and state which are crucial for your project to be successful. If done without permits, then the project could be not done up to code which would not pass a city inspection if that happens, or it will be hard to get passed an inspection without a lot of issues for selling the property.

The timeline for getting the permits done can be four weeks, or twelve weeks, it really depends on the city. This is holding costs for the owner, builder, or developer. Something to add into your numbers as you wait to get these all done prior to work, and it’s really tough to get work done while waiting for the approval.

Conclusion

The best option is the fastest and cheapest way, which is not permitting the property however, there are a lot of cons to this though and it’s tough to use this as a business model by not permitting if you are an investor looking to stay in real estate for a long time. Take a look at the cons and then look through the pros to see what fits best with your strategy.