Should I spend the money now or later??

Certificate of Occupancy

     When purchasing a new investment property this is always a question that comes up between buyers and sellers. The Certificate of Occupancy (could have other names in other cities) is a required document that must be active and transferable at the time of sale in some municipalities. What does it require? It requires the repair of any health and safety code violations that may exist on the building at the time of transfer. Not all cities or towns require this document but it is important to check with the local government office or your realtor to verify if this is a requirement.

A Certificate of Occupancy is required on all rental properties from 1 to 100 or more units unless you are going to live in one side of the property. To get a C of O in our area (just in the city not necessarily in the outlying towns), and if the current C of O on the property is more than 3 years old, you or the seller have a city building inspector go through the property. He or she will write up any code violations that exist. The majority could be health and safety but the list is not limited to those. This is different from you hiring a building inspector to examine the property to inform you of the condition of and about any problems with the property before you complete the sale. The city inspector will come out when the repairs have been made and will approve the issuance of a C of O which will be good for 6 years. BTW this does not mean that you are free and clear from any future violations or repairs that may come up after the sale. If problems come up from obsolescence or tenant damage etc. the city could be called and sight new issues. One of the items that must be addressed during these inspections in Rochester, and other places, is the evidence of lead paint. This could be costly.

The idea of bringing these items up is not to scare an investor from purchasing but just to make you aware because very often you can get a much better purchase price by accepting the property ‘as is’ and taking on the responsibility of getting the C of O yourself after purchase. However to do this you need to get a good and honest evaluation of what it is going to cost you to make the repairs. Don’t always trust only the realtor who might or not might have a realistic figure what repairs cost. An outside building inspector and speaking with several contractors is your best bet. Always ask the seller why he or she doesn’t want to get the C of O to transfer to you. Then from a financial standpoint you can decide what the best way to make an offer is. Good Luck!