Rehabbing a Cleveland Rental? Who Can Pull the Permit Matters More Than You Think

by Mike Ferrante

A few years back, in an article I wrote called "Flip or Flop," I admitted to screaming at my television. One of those cable rehab shows had a contractor named Armando "solving" a water problem by putting drainage pipe along the side of a house, and he was putting the pipe in the hole upside down. The holes face down, Armando.

It's funny on TV. It's not funny when it's your rental and your money. I bought my first investment property at 23, and the lesson has held up through more than 50 flips since: hire professionals for the jobs you can't do, or shouldn't do. In Cleveland, the city's rules make that decision for a lot of investors.

What the city says about who can do the work

According to the City of Cleveland's Department of Building and Housing, owners of one- or two-family homes can do alterations, or even build a home, without being registered contractors. They still have to follow the same rules for permits, plan review and inspections.

Contractors, on the other hand, must be bonded, insured and registered, and electricians and plumbers must also be licensed. If your rehab plan depends on a friend who "does a little of everything," check whether he can legally do the permitted parts of the job before you count his bid.

What needs a permit

The city's permit requirements treat small, like-for-like repairs differently from real alterations. Minor repairs, like patching a roof with the same material on up to 10% of it, or replacing broken glass, generally don't need a permit. Things that do include:

Replacing whole window units
Building decks
Installing or changing electrical, plumbing or HVAC
Larger replacements of roofing, siding or other components

That covers most of what a typical rental rehab includes. Plan review costs $20 per 1,000 square feet of work, with a $20 minimum, and for one- and two-family homes the city says it generally takes three to five working days. Inspections follow the work: after foundation excavation, after rough-in and before work is covered up, and at completion. When in doubt, call Building and Housing before you start.

How it changes your numbers

In "Flip or Flop" I wrote that you should know what you're going to spend before you ever make an offer, and that you should know your contractor's pricing up front, even if it's only an estimate. In Cleveland, that estimate needs to come from someone who can actually do the permitted work.

Price it with registered contractors. A bid from someone who can't pull the permit isn't a real bid.
Build permit time into the schedule. Plan review and inspections take calendar days. Time is money in this business. Every month the property sits, taxes, utilities and insurance come out of your profit.
Get copies of every permit. The city recommends asking your contractor for copies before work starts.
Don't accept work before the final inspection. That's the city's advice, and it's good advice.
Verify registration. The city lists 216-664-2910 for confirming a contractor is registered. Make the call.

Buying a house someone else rehabbed

This works in the other direction too. If you're buying a Cleveland property that was recently renovated, ask for the permits. Unpermitted electrical or plumbing work is a problem you inherit, and it tends to surface at the worst time, like during a rental inspection or when you go to sell.

Last week we wrote about Cleveland's Lead Safe rules for rentals built before 1978. Between that and the permit rules, the work on an older Cleveland rental needs to be done right and documented, not just done.

Owner-occupant or investor: why it matters

The same house can be a very different project depending on who owns it. An owner who lives in a one- or two-family home can do permitted work on it themselves, as long as they follow the permit, plan review and inspection process. An investor who doesn't live there generally needs registered contractors for that work, which changes both the cost and the schedule.

If you're house hacking, living in one unit of a two-family and renting the other, ask the city how the rules apply to your situation before you plan to do the work yourself. Getting that answer early can change what you're willing to pay.

A short pre-offer checklist

Walk the property with a registered contractor and get a written estimate.
List which items need permits and how long review and inspections may take.
Ask the seller for permits on any recent work.
Build the permit timeline into your loan term and your first lease date.

Looking at a Cleveland rental?

If you want help thinking through the rehab scope, the timeline and who needs to do the work, schedule a time with me or someone on our team at 21mike.com.

Mike Ferrante
The Mike Team at LPT Realty
www.21mike.com
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