If you haven’t given permitting your full attention during past rehab projects, this is a good time to start – especially if you’re remodeling in the City of San Antonio.
The city’s Development Services Department, which oversees building permits, has assembled a team of building inspectors to enforce city permitting regulations on home renovation projects. Real estate investors, property owners and contractors alike are in the crosshairs of this inspection team, known as the Strike Force.
Cracking down on un-permitted and potentially unsafe work is their business, and business is good. In 2019, its first year, the team issued more than 900 citations, with 200 more in the first month of 2020 alone, according to a news story in the San Antonio Report.
PERMIT NOW, SAVE TIME AND MONEY LATER
Building permits are required when a property owner or contractor performs remodeling work on a residence. Not every part of a remodel requires a permit, but they are necessary for work including roof replacement, installing new windows, specialized trade work including plumbing, electrical, mechanical (such as installing HVAC equipment, exhaust fans, and dryer ducts); and adding or removing walls, making additions or other structural changes.
The consequences of a violation are expensive (and more costly than just getting the permit in the first place). Fines start at $300. Contractors caught doing work without proper permitting may have their licenses suspended or in some cases revoked, prohibiting the contractor from working in San Antonio. Often contractors will pull these permits as part of the service they provide, but if they don’t, property owners will be held responsible. Owners could face fines, liens against the property or worse.
Permitting violations can also cost property owners thousands of dollars as inspectors review completed work, sometimes taking drastic measures to inspect work that’s been done without permits. One investor had to cut holes in drywall to show inspectors that electrical work had been done correctly; another had to dig up 12 feet of the sewer line to prove it was done correctly.
Why don’t property owners pull permits? Sometimes it’s ignorance of the rules, especially for new investors. Some don’t want to be bothered. Some rehabbers think they can save money by not paying for permits, which range from $26.50 to more than $400. Some prefer to avoid the scrutiny that a permit will bring to other aspects of their rehab.
Others think that permitting will hold up their project. That concern may be valid, especially in municipalities experiencing booming growth. Fast-growing areas such as New Braunfels may be experiencing backlogs on their permitting approvals, especially with the effects of COVID-19. Investors say that routine permitting in the City of San Antonio is generally a 3-7 day process now, and longer for new builds or homes in historic or conservation districts.
In San Antonio, permitting rules have been in place for years, but enforcement has been inconsistent or often, non-existent. The Strike Force has found dangerous violations including faulty gas lines, bad wiring, and structural problems since its inception last year.
Those days are gone, and that’s for the best, according to real estate investor Seth Teel, owner of Somos Real Estate.
“We need to standardize these processes so we’re not dealing with the issues of the last 20, 30 years when permits were not enforced at all. This leads to terrible renovations with no longevity to them and ultimately, decreased property values” Teel said. “It’s part of becoming a first-rate city. Enforcing permits creates a level of professionalism that’s increasing the overall quality of the houses being renovated and rebuilt here in San Antonio.”
TAKEAWAYS FOR REAL ESTATE INVESTORS TO AVOID AVOIDABLE HEADACHES AND FINES
Teel knows first-hand the importance of permitting. On his first flip in San Antonio, he was sued along with a contractor a year and a half after selling the home. When the buyer called him about a problem, Teel discovered that not only had the contractor’s license lapsed when he performed the work, but that he had lied about pulling the necessary permit.
These days, Teel only gives the first draw of money to a contractor after the permit is pulled; they get another draw when the rough-in inspection is passed.
“It’s a protection for the investor, and ultimately, it’s a liability protection as well,” he said.
For any real estate investor, there are a couple of key lessons to remember:
Take permits seriously. Find out your municipality’s requirements. An online search will provide details on local requirements and permitting processes.
Don’t cut corners. Permits may require extra steps upfront but have the potential to save you thousands of dollars and lots of time.
Hire only licensed contractors. Often your contractors are the ones who will pull permits on your behalf. Make sure they do, because ultimately you will be held responsible.
Factor in enough time. Allow time for your permit application to go through, especially in areas experiencing high growth or areas hit hard by COVID-19 closures.