My Latest Triplex Purchase Resulted in the Threat of a City Fine: Here’s What I Learned

My Latest Triplex Purchase Resulted in the Threat of a City Fine: Here’s What I Learned

4 min read
Nathan Brooks

Nathan Brooks is the co-founder and CEO of Bridge Turnkey Investments, a Kansas City-based company renovating and selling more than 100 turnkey properties per year.

Experience
With more than a decade of experience in real estate investing, Nathan is a seasoned investor with a large personal portfolio and a growing business portfolio. Just last year, through Bridge Turnkey Investments, he helped investors add over $12 million in value to their real estate portfolios and has goals to crush that number in the coming years.

Nathan regularly produces educational content to fuel his passion for helping other people learn about and find success in real estate investing. He has been featured regularly on industry podcasts, such as the Bigger Pockets Podcast (#87, #159, #232, and #319), Active Duty Passive Income podcast, Freedom Real Estate Investing podcast, Fearless Pursuit of Freedom Podcast, Titanium Vault, InvestFourMore Real Estate Podcast, the Best Real Estate Investing Advice Ever show, the Good Success Podcast, FlipNerd, Wholesaling Inc., the Real Estate Investing Profits Master Series, Flipping Junkie Podcast, Flip Empire podcast, Think Realty Radio, and more. He is a sought-after speaker and writer, featured regularly on the BiggerPockets Blog and found on stage regularly at events across the country.

He is also part of multiple leadership groups for top executives, including Collective Genius, an invite-only group known as the Elite Investor’s Board of Directors.

In an effort to help investors further, Nathan started Bridge Real Estate Investing Meetup (BREIM) in 2018. The group’s tremendous growth earned it the title of “Largest Meetup in Kansas City” after only three months running, and it continues to grow daily.

Nathan is a passionate leader, well-respected investor, and friend to everyone he meets. He currently lives in Kansas City on his 11-acre property with his wife and two beautiful children. He loves to enjoy the outdoors, train MMA, and come up with new business ideas to crush.

Read More

Join BiggerPockets (for free!) and get access to real estate investing tips, market updates, and exclusive email content.

Sign in Already a member?

About a month ago, we closed on a “killer” triplex deal — awesome area, neighborhood, strong rental demand. Honestly, I just really dig this building. It was built around the turn of the century, and has both the visual curb appeal, as well as the 100-year-old wood flooring and high ceilings that really make it feel grand.

We heard of this deal off market from one of the commercial guys we work with, and went and viewed it. The property was the typical rehab house that needs a lot of work — flooring, plumbing, electrical, paint, drywall, kitchens. It was a full (large) rehab.

We got the property under contract and began doing our due diligence, getting our contractor bids, speaking with the title company to get them all the information they need. I love redesigning the interior of buildings — figuring out how to make the best use of the space. I spent a lot of time on layout, colors, and all the details for that project with our property manager and one of the contractors.

Related: The Ultimate Due Diligence Guide for Buy & Hold Properties

Everything went extremely well through closing. The project started on time, and was supposed to be done in about 60 days. There were several issues to deal with regarding plumbing and electrical, but nothing too crazy. Then the drywall starting going up – you know these old buildings take a lot of love to get them looking good and ready for paint.

The kitchen layouts for each unit were completed, and the project was more or less on target time wise. Then I got the phone call …

My contractor started calling me. And he called me again. And then again. I don’t remember what meeting I was in that day, but I remember the discussion over the phone. He said something like, “Nathan, is there any reason the city would be out there? He was asking what we were doing and tried to get into the house.”

#notawesome

Unexpected Inspections Are Never a Good Thing

I was headed out of town for a while, so after some internal discussion we scheduled a time out at the property. There wasn’t really anything we needed an inspector for, although you don’t really want those guys in there anyway unless it was planned. It gives me the sweats — just like asking out your first girlfriend in middle school. 🙂

I got the inspector on the phone after a few days of phone tag, and after a very short and slightly annoyed (on his end) conversation, we set a time to view the property. That was all the information he gave me.

The day of the inspection I thought through every possible issue that could have come up, and why or what the problem was. He approached the house a few minutes after our scheduled time. I introduced myself, we shook hands and walked into the property. He immediately started taking pictures of EVERYTHING and asking questions.

As the walk-through continued, the story started to unfold. I had had workers in the house for a few weeks now, and a lovely (please, don’t catch my sarcasm) neighbor decided to call the city on us because she saw them walking in and out of the house.

I carefully walked that entire house with him and chatted through everything we had done — how we had checked with the city throughout the entire process to make sure we didn’t need permits for anything. He really didn’t have a word to say about what was done in the entire building.

PHEW!

Success!

I could almost hear the Rocky theme song in my head at that point. I felt like we were out of the woods with no other issues — and a win over the neighbor who couldn’t mind her own business.

Well…

Or not…

At the very end of our appointment, he calmly tells me that from the day it had been built, this building had NEVER been licensed or registered with the city as a triplex.

WHAT?!?

SERIOUSLY?!?

Oh yeah. And it got better.

We had three options.

  1. Operate as a triplex and be fined and shut down by the city. #awesome
  2. We could apply for a non-conforming permit from the city, wait at least one month but probably longer, have them come back in for all kinds of inspections, and we operate as a DUPLEX. Remember, we bought the building based on the numbers as a triplex. This wasn’t a very good option, either.
  3. We could bring the building back to a single family, getting any permits needed for that, and then change walls and doorways, replace doors with cased openings, and tear out walls we had JUST finished.

Ack.

That was not a fun decision to make.

Solution

We thought through all the options. The good, the bad, and the ugly.

After careful consideration, we decided to take the property back to a single family rental. For very little additional cost, we could skip putting in three kitchens, and instead use those dollars for the extra rehab to change door openings to bring it back to a single family unit.

Because we were reverting back to a single family home, we would no longer have the burden of paying the utilities for all the units.

Lessons Learned

Even though the title company saw and agreed it was a triplex, even though many of my neighbors on streets adjacent to mine are triplexes, it doesn’t matter — the city didn’t knock on their door, they knocked on mine.

Related: How to Choose the Best Areas for Multifamily Deals With Confidence

If you are buying a multi-family, you need to make sure it’s zoned for a multi-family. I am also thankful we were able to use it as a single family unit. We could have rehabbed and flipped it for a profit, but we wanted to keep it if we could make it work.

So, what kind of ON THE JOB learning have you experienced in deals that didn’t exactly turn out how you expected? And how did you overcome it?

PS: That building is almost done. We made friends with the inspector, and we should have tenants in it before end of the year. Phew.

Investors: What did you think of this story? Have you ever run into anything similar?

Leave your comments below!