When I first started investing in real estate, most of the contractors I hired for my rehab projects were butchers. A butcher is a part time carpenter but full time hustler. Many claimed they could do carpentry work, but I soon found out it was only at a very simple level, and often for about 2 hours per day.
During that time, when I had very little rehab experience and I was new to the city, I was willing to give anyone who was willing to work a chance. As a result, my first rehab project was a total financial disaster. In fact, poor project coordination, lack of time management, and thievery drove my rehab budget up so much that I nearly lost money on my first deal. In addition to those problems I began to think my rehab project would never pass the building code inspections.
Do You Need Building Permits For a Rehab?
When you rehab a property you must first obtain the proper building permits. As you progress through different stages of the project you have to call for inspection. For example, after you finish your framing you must call for framing inspection. The Framing Inspector will come out to the house and inspect to see if the framing is up to building code. If the framing is not up to building code the inspector will fail the inspection and red tag the job.
What Happens If You Fail An Inspection?
When this happens, you have to pay the red tag fee ($25-$75), then you must correct the problem and call for inspection again. When the inspector comes back out to the property, and if it fails the inspection again, he will issue you another red tag. If the property continues to fail inspection, it gets very costly in terms of lost time and fines.
My Building Code Inspector Debacle
Let me share a horror story early in my rehab experience with a building code inspector. For my first rehab project, I paid a few guys who claimed to be carpenters $75.00 per window to remove and replace 16 windows. It took them about 1 week to finish. After they were finished, they requested to get paid. Before I paid them I walked around the house and did my inspection. I didn't know what the building codes for windows were, but I wanted to make sure they looked okay.
Unfortunately for me, I paid them their $1,200. I then called for an inspection the next day. When the inspector looked at the windows she informed me all the windows except 2 were installed incorrectly. On her inspection report she stated the windows needed to be removed and reinstalled correctly. In bold letters it read: WINDOW HEADERS INSTALLED INCORRECTLY!
I argued with the inspector that the windows were installed correctly. She tried to explain to me why they were not. However I was so mad that I refused to listen to her. She red tagged me $75. Angrily, I called the guys who had my $1,200 and asked them to come back and correct the problem. They made many promises, but I never saw those guys again. (Be sure to read the article: Paying Contractors To Do Work Twice).
Once I resigned myself to the fact that I needed to start over, I scouted around to find some other guys to do the work. Learning from my previous mistakes, at least I thought, I informed this new crew that I would be holding back $100 after they were finished. I would release that money once the windows passed inspection.
This new crew took out the 14 windows then reinstalled them. Again, I did my uninformed inspection, and then paid them $800. I held back $100, pending a successful inspection. I called for inspection again. The next day the building inspector came to the project, she inspected the windows and once again pulled out her inspector report and red tagged the job. This time, the red tag cost me $150!
Frustrated, I tried arguing with the lady for about 15 minutes. She politely told me that if I would listen to her I wouldn't be getting red tagged. I decided to hear her out. She explained to me in detail what a header was and what I must do to pass inspection. On her inspection report she again noted: WINDOW HEADER INSTALLED INCORRECTLY!
This kind of aggravation was enough for me to question why I was in the real estate business. However, I soon regained my composure. I felt somewhat relieved knowing that I had held back $100 from the last guys who had done the job. I called them up to tell them the inspection had failed. We agreed to meet at the house. They honored the appointment and met me there at the agreed time. I explained to them that the inspection failed because the inspector wants the windows to have a header.
This meant as before we would have to take all the 14 windows back out, then according to code frame a header above the windows before we reinstalled them. At least I now knew what the word code meant, and what a header was. They said they would come back in the morning and perform the task. But, as you might have guessed, I never saw those guys again either.
5 Ways To Form A Relationship With Building Code Inspectors
The $100 held back wasn't enough leverage to get them to come back. ‘Again, I was back to square one and now out over $2,200! The valuable lesson I learned from this experience was, I should have from the start established a friendly relationship with the building inspector I would have saved myself at least $800. When she red tagged me the first time she tried to explain to me how I could correct the problem. Stubbornly I wouldn't listen to her. That cost me valuable time and money. Sometimes you have to learn the lesson the hard way. Furthermore, let me suggest to you a few things you can do to build a better relationship with the building inspector:
#1 Relax – Don't be so panicky at the sight of the building inspector. If you look guilty, he/she will be suspecting there's something you're trying to hide.
#2 Smile – Welcome the building inspector with a smile. Make him/her feel comfortable. Act professionally.
#3 Listen – Let the inspector explain the issues to you. He may have something important to say that will teach you something and save you some money.
#4 Ask Questions – Most of these building inspectors have been in the construction business for years. I had a plumber inspector who owned his own plumbing company for 20 years. He was full of knowledge to share.
#5 Be Thankful – Regardless of the result, thank him for coming to your property. Try to make a friend. I now know to be kind to all inspectors. Although I may be upset because the inspection failed, I make sure my attitude is directed toward the guy who did the work because he didn't do it right.
Make sure you try to work with the inspector instead of against him. Don't look at him as a foe, but a friend. An inspector can help save you a lot of money. If the carpenter really is a butcher (like in my earlier days), the inspector will point it out during the inspection.
However, don't think that because you occasionally get red tagged, your contractors don't know what they are doing. Even experienced contractors get red tagged occasionally. On the other hand, if your contractors are receiving multiple red tags this may indicate that they are only part time carpenters, and you can't afford to hire them. To make money in real estate, you need a top notch team.