Who’s Afraid of the Big Bad Wolf
For those of you new to the sport of real estate investing you may not know about one of the scariest parts of all: City Certifications-did I just hear a GULP!
After dealing with these guys since the ripe age of twenty-ish I’ve become somewhat savvy at how to deal with these guys as real estate investors. If you are not aware there are a number of cities, and yes it’s growing, who require you the buyer to call in all 5 divisions in some cases to traipse through your project before you’re supposed to do any real work. This piece is not being written to debate if it’s fair, ethical, waa-waa-waa. If you want to do business in this arena you’re going to play it somewhat under others rules, namely local government.
Here’s how a typical C of O (certificate of occupancy) inspection goes. You close on a house. You pay a fee, usually in the two hundy to three hundy range. The city inspector(s) come out and inspect. You call city and beg for them to fax the report, go pick it up, or wait for them to snail mail it to you. Then you finally see what repairs are required, and what repairs require licensed individuals such as HVAC, plumbing, and electric. The repairs requiring licensed contractors to sign off on them also require another round of permits which in some cities can cost upwards of $600. If you’re a math whiz you’ve already spent up to $900 just for paperwork after you close, just for them to tell you what you have to do.
Fear not my brave Dragonslayers…
Here are my 5 can’t miss tips for how to practically put your city certification work on autopilot without barely any input form you.
1. Check with the city before you close to see if there’s already been an inspection. If there has already been an inspection you have a right to it, all you have to sign some type of affidavit stating that you’re only asking for your own personal knowledge. At this point they’ll hand the inspection list over and you may have saved $200-300. Now that’s worth reading this article alone, right? So why might they already be done.
Two reasons that I’ve run into over my hundreds of purchases;
Uno: the bank, asset management company-basically the seller already paid for them, possibly in hopes of the property being mortgageable or for a 203k.
Dos: a previous possible buyer paid for them to aid them in the decision of whether to pay the offer price that the seller accepted, regardless-you save dough.
2. Check with the city before you close to see if there’s already been an inspection. I have a few corny sayings but they all stem from doing real business not made up to sound good on stage. the saying for this is “you can never get hurt if you buy low enough”. In English, offer a couple grand less in case you need extensive cert work. There’s only been 1 time in hundreds that the cert work cost over $2000 for me personally-yes that’s including the permits and rental inspection
bullsh*t , oops I meant fees.
3. Call them out before you start construction. Don’t be a Lilly Livered wimp & more importantly don’t try to be too slick and get a bunch done and try to hide it. If they find out not much will happen except for the rest of their career they’ll go through your properties with a microscope. Call them out before you do any major work. Sure you can rip up carpet and even some light demo, but if they think you’re trying to skirt the system you’ll be sorry-trust m I know.
4. THIS IS THE MOST IMPORTANT-Meet the inspector out there. Now does it have to be you, no. But your main contractor should definitely be there if you trust them enough to speak on your behalf. You never want the city to think that they’re dealing with some big-shot-money-bags who they can rake over the coals. You want your simple little part time real estate investing business to seem like you’re just a weekend warrior. The best way to do that is to NOT “big time” the city inspectors. Anyone who knows me will attest you’ll usually find me in a suit ant tie, but if I have to meet an inspector, which is rare, or if they’re being unreasonable to my contractor I’ll show up. And you better believe when I show up I look, act, and talk like the average Joe who just wants to get done whatever the inspector asks for.
5. Meet and exceed their timelines. Do you take your job serious? Do you want to make an a good impression on your superiors as often as possible? Well guess what, so do they. So Make It Happen for them. If you have 8 or 12 weeks to complete their list, get it done in 4. I realize sometimes you’re waiting for cabinets or a weird stray part from eBay. As a general rule in business and life it’s always best to under promise and over deliver. You can always get extensions-and believe me, sometimes you’ll need to beg for their grace. But if at all possible make their job as easy for them as possible. You will be rewarded.
BONUS #6 Don’t be afraid to drop off donuts at the city office or have a nice cold water for the inspector as he enters your property ***disclaimer*** I do not condone any type of bribery, it’s probably a felony so don’t do it*** All I’m suggesting is to go above and beyond. If the operator at the city of Southfield is always sweet to you over the phone and gets you the info you need without having to drive there or if someone in the city of Royal Oak is nice enough to send you the inspection reort via fax or e-mail-don’t let it go unnoticed. A $5 Starbux card will go a long way. Concerning the inspectors themselves, have a cooler on site with some soft drinks for them, you, and even your contractors. You’ll be greatly appreciated and rise above all the rest of the people they me that day. Maybe your list will shrink a bit or they’ll tell you to cap this or caulk that instead of replacing. Go to Wal Mart and get some Gatorade-it’s only $1.00.
If all this sound like too much work then maybe you should look into another part time gig, these guys are always hiring.
In all seriousness the reason I can write about this subject with such conviction is-I live it every day. Not just through my own investments but also with the hundreds of other REIA of Macomb members who’ve been dealing with this stuff for decades. The beauty about the REIA of Macomb is we are not a flash in the pan “club” who’s just sprung up over the last couple years since the foreclosure boom. Anyone can buy a house cheap today, even my Grandmother. We’re going on our 5th full year and we’ve been gaining momentum everyday. We aren’t here to sell you books and tapes, although education is important, it’s only a small piece to The REIA of Macomb puzzle. Yes, I’ve literally invested over $50,000 in my personal real estate investing education, probably double that, and I wouldn’t be where I am today without it. However, the true strength lies within the membership itself. There’s been millions, yes millions, of dollars made directly because of the REIA of Macomb. The question is are you willing to do what it takes to get your piece of the pie.