An informative video today to continue our new construction series. We are going to look at how important it is to build in jurisdictions (cities, counties etc) that are friendly to builders. I added it up today. I have personally built and got permits in 9 different cities, towns and counties. There is a big difference in the amount of regulations, permits, fees, time etc that different municipalities take to approve new construction permits and what fees they charge. If at all possible you want to build in a jurisdiction that works with you and doesn’t put a bunch of road blocks in your way. Some are pro business and some not so much.
Here are some specific ways that municipalities get in your way and increase your costs:
- high permit fees
- amount of red tape, paperwork that is needed to apply for permits
- length of time that they take to make a decision on permits
- building code adherence; the building code that is put out at the state / provincial or federal level is a minimum level of acceptance; individual municipalities have the right to ask for higher standards; sometimes that is good and sometimes that can be quite onerous; the bar can be set way too high
- inspections; different jurisdictions have different levels of inspections ranging from almost none to coming out too much
- fire code; just like building code there is a big swing on standards here
I don’t want to give the impression that I am against building standards or fire code, quite the opposite. I build good quality buildings and take pride in what I do, but there is a happy medium between the rules being too lax and too onerous.
Taking too much time to approve permits has a distinct impact on your costs as a builder. As a builder you will have carrying costs, these are costs that you incur each month whether you are building or not. These include mortgage / finance fees, insurance, taxes and maybe some utility costs. Month after month, as you wait for your permit approval, these costs are going out of pocket and can really add up. Usually, during this period, you have no revenue coming in so these are just sunk costs.
As you are doing your research and diligence on the feasibility of a new construction project make sure you factor in the above items into your decision – both in terms of time delays and costs added to the project. Remember that time is money.
Please watch the attached video for my thoughts on “Build In A Jurisdiction That Is Friendly To Builders.”
As always I am actively looking for investors to venture partner with as well as people to mentor. If either of those interest you please feel free to text, call or email me or click on the contact buttons located throughout the www.huttonradway.com website.
Happy Investing
