One of the most common questions I get is whether or not you need a General Contractor license to flip houses.
I have worked with real estate investors, agents, and skilled tradesman all looking to get a General Contractor license with the goal of flipping houses.
While you do not necessarily need a contractor license to flip houses, you will need one if you plan on doing remodels.
There are some things you need to understand about what a General Contractor License can allow you to do and whether it is right for you.
First lets start with the basics:
What Is House Flipping?
House flipping is when an investor buys a house and then sells it for a profit.
Typically, the house is purchased and then re-sold quickly within weeks or months. There are TWO WAYS of flipping houses:
- An investor purchases a house after identifying repairs and updates that can be done to the house which will increase its value and allow it to be sold at a nice profit. The investors calculates how much it will cost in labor and materials and how much the house could be sold for. Investor buys the house, repairs it and sells it for a profit.
- Home values in a particular area are on the rise and an Investor identifies a potential opportunity where they could purchase a house and sell it for a profit later. They purchase the property and sell it a few months down the line without making any changes or repairs.
Method # 1 (Requires a General Contractor License)
- To remodel a house and then re-sell it requires you to have a General Contractor License
- You would not Qualify as an owner-builder because the Contractors State License Board requires you to live in the house for 12 months prior to its sale
- An Owner-Builder cannot construct and then re-sell more than two properties within a 3 year period
- You would assume all responsibility for pulling permits, workers compensation, liability insurance, tax liability as you become an employer by hiring subcontractors, and paying suppliers.
Method #2 (Does NOT require a General Contractor License)
- If you aren't making any structural changes to the house than you would not need a General Contractor License
- Repairs to other aspects of the property: (flooring, electrical, roofing etc.) may require specialty licensing.
- Making repairs will require building permits.
California General Contractor License Requirements
To receive an exam date with the Contractor State License Board, you must meet the following basic requirements:
- 18 Years of Age
- Valid Drivers License OR USA Issued Identification
- Social Security OR ITIN #
- Cannot Currently Be On Probation or Parole
You must also have:
- 4 Years Journey Level Experience
- Signature From A Qualifying Individual
- A Way To Prove Experience If The State Boards Asks
What Does A General Contractor do?
A General Contractor will often oversee the direct management of a job site and report to either a project manager, architect, or directly to the client.
Construction plans may be delivered to the general contractor who would then asses the scope of the project.
They would then be responsible for:
- Ensuring Job Site Safety
- Estimating Labor and Material Costs
- Ensuring Job is completed on time and at spec.
- Pulling Building Permits
- Ensure that the Project is being executed to code
- Scheduling Inspections
- Keeping clients, project managers and investors up to date on progress
Key Trades You Have To Know To Get a General Contractor License
To learn more about the costs, experience requirements and examination, check out the Complete Guide to the General Contractor License!
California's laws are set up to protect the interests of the consumer. Be sure that you know what you are doing before you get involved in House Flipping.
Check out this great article from Investopedia.com that breaks down what you should know before you get started.
If you do not have any experience in construction and are looking for a place to start, check out the complete roadmap: Apprentice vs. Journeyman!