Swapping pens for sledgehammers
A how-to on getting construction started
A journey of a thousand miles begins with a single step, and every big accomplishment has to start somewhere. The funny thing about long journeys is that the first step is physically the easiest but mentally the hardest, while the last step of is physically most difficult but mentally least challenging. To take the first steps requires planning and resolve. You need to have a plan and be ready to take on the coming journey. Zero to one is scary, but without it, you can’t get anywhere else.
Every great person in every field of human endeavor had to take a first step on their journey. Mozart had to learn music. Leonardo DaVinci had to learn to paint, and even Einstein had to learn all the math and physics of his day. Their accomplishments were built on the sum of their learning. It often amazes me how far one can get all on their own, by simply consuming instructions, tutorials, manuals, and how-to videos. With each passing project, I have taken on more responsibility and reduced vendor costs. With enough experience under my belt, I have chosen to self-graduate to the next level of responsibility.
Once the ink is dry on all your closing costs, the clock starts ticking. As the project begins, there are two critical cost centers to keep an eye on: the actual construction cost and potential liabilities. Regardless of whether you will be doing construction or not, identifying and eliminating potential liabilities is key.
As the new owner of a property, you may have little insight into how the previous owner maintained the property or all the preventative maintenance required. In our current project, we have multiple vacant units and one occupied unit that will continue through construction. Since only 5% of the property’s space is currently inhabited, it does not make economic sense to heat the entire building through an upstate New York winter. Consequently, any plumbing in unheated parts of the building will freeze, including the water main.
Having experienced frozen pipes that thawed and burst, I know full well that such damage on a well-placed pipe can cause tens of thousands of dollars of damage in a few short hours. In this case, the liability reduction comes in the form of a plumber who cut and drained all the unused lines, insulated all the live plumbing, and added localized pipe sensors and heating elements. At another property, there are yard drains that need annual cleaning to ensure they are freely flowing through the fall, winter, and spring. Otherwise, a backup could cause basement flooding and additional damage.
With the property stabilized, the next step to getting construction going is planning and permitting. Thankfully, the architect is driving that part of the process. Moreover, this is one of the few places where different parts of the process can be run in parallel, namely planning and demolition. In most jurisdictions, a permit for demolition and a permit for construction are completely separate. Code does not require that you know what will be built prior to issuing a demolition permit; it simply requires you know what you will be demolishing. So, while the architect works out building details with the bureaucrats, parts of the old building can be peeled back and removed to expose every component and system in the building.
Once most of the plaster is removed from the interior walls, assessments of the electrical, plumbing, mechanical, and structural systems can be completed. This is the scariest time. This is the phase where you find things that no inspection or engineer could ever uncover. Best case scenario, you find nothing materially wrong. Worst case scenario, severe structural damage from something like an untreated termite infestation or some other similar damage.
The most critical milestone to start demo is the initial review meeting with the city. In this meeting, we will finalizing the full building schematic and get the green light to move full speed straight ahead. Since building code is open to interpretation, the most efficient path is usually to ask the building department to review the plans before the application. The objective with this method is to get all the regulator’s objections before the application is submitted, correct the objections, and submit an application very unlikely to be rejected and require re-application. After meeting with the regulators, we’ll be able to wrap up a demo plan and pull a demo permit.
As part of the permit process, a set of plans created by a licensed architect, must be submitted along with liability and workman’s compensation insurance. One of the cost-saving strategies and increased responsibilities implemented for the first time on this project is acting as one’s own general contractor (GC). The only obstacle to being your own GC in many smaller municipalities is the cost of the insurance policy.
While demolition is underway, we’ll finalize the full building permit and initial bid set. Since we’re doing a project in a historic district, we also need approval from the planning and zoning board before the permit is issued. Unlike projects in my hometown of NYC, small urban city governments tend to move quickly with far fewer layers of process. We plan to pass through the initial bureaucratic morass one month after our initial meeting. If all goes to plan, we’ll have a proper building permit in hand before the end of 2024.
Another critical element of de-risking the project is landing an accurate budget and scope. By removing most of the interior plaster and wallboard from the framing, all of a building’s defects and deficiencies become clear. With all the walls open, every contractor bidding on the job will have a very clear look at every ugly nook and cranny in the building. At the same time, possible issues that may require a structural engineering assessment or other professional help can be uncovered. We work hard to avoid the pitfalls associated with buying a property with hidden defects and damage, but mistakes happen. There’s no way to know the real condition of a building that has stood for more than 150 years without looking inside the walls.
Once the walls are open, the only known-unknown risk left is the condition of the sewer main. Interestingly, many early 19th-century buildings were built with inch-thick ceramic sewer mains with far more capacity and a lifespan of centuries compared to modern cast iron sewer lines with a lifespan of decades. Most of the time, the building’s old stuff is a liability, but is the case of a sewer. sometimes really old is better than new. Afterall, some Roman era aqueducts and sewers are still in use today.
As we navigate the complexities of property ownership and management, it's clear that success in real estate requires more than just financial acumen. It demands a blend of strategic planning, hands-on involvement, and a deep understanding of both the physical and human elements involved. From the initial steps of securing a property to the intricate details of renovation and tenant relations, every phase presents its own set of challenges and opportunities.
In the end, the true measure of a successful landlord isn't just in the profits earned, but in the relationships built and the integrity maintained throughout the process. By approaching each project with a commitment to fairness, transparency, and a willingness to go the extra mile, we can create not only profitable ventures but also positive, lasting impacts on the communities we serve.
So, whether you're a seasoned investor or just starting out, remember that the journey of property ownership is as much about personal growth and community building as it is about financial gain. Embrace the challenges, learn from each experience, and strive to be the kind of landlord who makes a difference
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