How to perform rehab w/o permits on a sub-to deal: will I pass city inspection?

Question

Hello Community!

I’d appreciate some guidance on a few matters regarding my investment properties.

I recently purchased several properties in the following locations:

•	Ft. Lauderdale, FL

•	North Palm Beach, FL

•	Plantation, FL

•	Pompano Beach, FL

These acquisitions were done creatively, assuming the existing loans via subject-to deals without inspections. As a result, I’m uncertain if any of the properties have illegal additions or modifications. For instance, one property seems to have an extra bathroom that is not listed in the county records.

I plan to make some modifications, including removing a closet wall to expand a bathroom and taking out a kitchen island that contains electrical outlets and a switch. Additionally, I’m considering converting a garage into a bedroom.

If I want to list these properties on Airbnb, I understand I’ll need to obtain the following:

•	BTR (Business Tax Receipt)

•	CU (Certificate of Use)

For these, I’ll need to undergo a city inspection. My concern is whether the city could deny permits for these modifications, such as removing walls or converting a garage, or if they are mainly just concerned with safety and habitability. For instance, will I have to undo the bathroom that was already created?

I’d be very grateful for any advice or recommendations on how best to approach these modifications.

Also if I were to refinance in the future to pull out cash from the property, is this something that banks could refuse to lend on if I have code violations of lets say a wall that was moved or removed?

Thank you for your time and assistance!

Best regards,

Gio K

Jonathan Greene · Answer

No one else is going to want to tell you this, but it looks from the post like you bit off more than you can chew. Getting four creative deals locked down is awesome, but it seems you don't really know what's going to happen next. The potential for a loan call is higher and higher with sub to the more parties you involve if that makes sense.

Trying to take down four homes sub to and then do remodels to them all, and then list them on short-term rental sites, and get full permitting and ok for not just the STR, but for your renovations and all prior renovations maybe done without a permit, while on subto, sounds like a pretty big mess to me.

I would consult with a sub to specialist and prepare for the potential of having all the loans called at some point.

Bruce Woodruff · Answer

I'm not an expert on the loan part of your question, but as far as the permit status goes, I do have ample experience. I have found that most municipalities are willing to work with you on getting the unpermitted work into compliance. Particularly when you are the new owner and not the one who actually did the unpermited work.

However, they will not give you a pass....you will have to prove to the Inspector that the work was done 'up-to-code', and if it is not, you must bring it into compliance. Yes, this can be a royal PITA, and in some cases, may be impossible. That bathroom you mention may have to be torn apart and redone, it depends largely on the individual Inspector that you deal with.

I would go to the County/City Building Dept counter and talk to them in person. Be very polite, plead ignorance and stress your desire to make everything legal. They generally don't want unpermitted issues on the books any more than you do.

Better to do this ASAP and not mess with it, you want to show that you are serious about getting this corrected. Yes, it will cost you a lot of $$ and time, but you probably already knew this (I hope?)

Ryan Konen · Answer

Hi Gio,

Congrats on your new acquisitions! For the modifications, cities generally focus on safety and code compliance, but since you're considering structural changes like wall removal and garage conversions, obtaining permits is key. Unpermitted work can lead to issues during inspections for your Business Tax Receipt (BTR) and Certificate of Use (CU) applications. Without proper permits, there’s a chance the city may request you to revert any non-compliant additions (like the extra bathroom) to align with code standards.

When it comes to refinancing, banks tend to look closely at the property’s legal compliance. Unresolved code violations, such as unpermitted modifications, could impact your ability to refinance or could reduce the property's appraised value, affecting loan terms. I'd recommend consulting a local contractor or real estate attorney to ensure all changes meet city codes and to help streamline the permit process, especially if you’re aiming to use the properties as rentals on Airbnb.

Lucas Liu · Answer

Hello Gio,

I am a local agent and had a client deal with a similar situation with a property also situated in Broward county. A key strategy here is to partner with a knowledgeable local GC. This client faced similar hurdles with unpermitted changes, and having the right contractor made all the difference. They helped determine what modifications were essential for compliance and worked to maximize savings in the project.

Gio Kattan · Answer

Thank you very much for your reply!

How to perform rehab w/o permits on a sub-to deal: will I pass city inspection?

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