Updated: Mar 31, 2019
Permits are always a hot topic for real estate investors. They are a necessary evil, although lots of investors tend to skip this very important step and skipping the permit process can lead to big issues down the road.
ALWAYS ASSUME THE WORK NEEDS TO BE PERMITTED.
What work requires permits?
If you're doing major work to a property, chances are you'll need to pull permits. These could include permits for demo, electrical, plumbing, mechanical, roof etc. It's take a little work prep work to have all the necessary documents before you sit down at the city, to prepare ahead of time.
Permits always leads to an increase in the total project time, so you need to plan accordingly. It's best to schedule multiple inspections for the same day so you're not wasting your time or the inspector's.
Aside from the increase in total time, permits cost money. They can range from a few hundred dollars to well over a thousand. Depending on the scope of work, the city may require you to provide architectural renderings along with an engineer's report. Some cities allow hand drawn plans, and some require them to be drafted by a licensed professional.
Every. City. Is. Different. Remember that! Never assume what you had to do for one city will translate to another city. Always check their website and call to confirm. Be prepared to have visit the city multiple times until you have all the documents they require (it's like visiting the DMV). Be overly prepared and take every document you have (hand drawn plans, renderings, scope of work, project estimate, schedule, etc.)
Always try to be on site when inspections occur. Depending on the city and how they report inspections, there may not even be room for notes. You'll just see a red tag taped to the door and have no idea why the inspection failed. Even if the inspector leaves notes, it may be vague. If you're lucky enough, you'll have their phone number and you'll be able to contact them. Either way, meeting them in person and understanding what needs to be fixed can save a lot of time and money.
This is what you want to avoid. Not by hiding what you're doing, but by having the right permits in place and posted at all times during the project. It's usually pretty obvious when a home is being renovated, so it will catch the eye of inspector or city official who is driving by. If an inspector stops by and sees work being performed that is un-permitted, they WILL shut down the project and possibly impose a fine. At this point you'll probably need to settle up with your subcontractors since they will be out of work for days or weeks until you pull the necessary permits.
Checks & Balances
Aside from impacting the project, the last thing you want to do is hire a contractor who is performing poor quality work. You should think of permits and inspections as checks and balances. Reputable trades (electricians, plumbers, HVAC) will allow you to pay a portion of the invoice after certain inspections. This shows the customer (you) that the work was performed to code.