Do I Need a Contractor License to Flip a House?

The current real estate industry requires an investor to take up several titles and roles at the same time. At one time you are the managing partner, registering the business.  Later, you visit the house you are planning to flip and do a few renovations. After a while, you are on social media marketing your business.

Most investors are familiar with every element in house flipping.  Those who have been productive in the business have over time acquired knowledge to handle all aspects of a house flipping deal. Some of these roles may benefit from a contractor license.

Whether you need a contractor license or not depends on the nature of the project you are undertaking and your needs as an investor.

Having a contractor license can be a good thing.  However, it is not mandatory for an individual to have one for them to flip houses.

Let’s answer a few common questions in relation to a contractor license.

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When is a contractor license necessary?

You will need a contractor license for you to do certain rehabilitation and building tasks. This is mostly applicable when you are flipping a single home at a time.

For an investor with time and the required skills, getting a contractor license will be beneficial. You can do the renovations yourself instead of outsourcing. This will not only save on costs but you will also have a chance to do the job to your own standards.

Getting a contractor license will be important if you are undertaking house-flipping as a hobby and not for cash flows. You will enjoy revamping a house to gain satisfaction. Additionally, if you are flipping part-time, you will also need a contractor license for you to refurbish your house at your own pace and maximize your returns.

When is a contractor license not necessary?

As a real estate investor with a desire to build a house flipping business, you will be in a better position hiring contractors to do the renovations than doing the work yourself.

It will not only save your time for more valuable engagements but also get quality work from professionals. Therefore, the time and money spent on getting a contractor license will not make economic sense to you.

What are the benefits of getting a contractor license?

  1. Saving money that will have been used on paying for labor.
  2. Being able to revamp a house at your own speed.
  3. Due to reduced costs you will have higher profit margins.
  4. You get an opportunity to network with other contractors.
  5. Before getting licensed you acquire the relevant knowledge and skills which are crucial assets you can use to gain more income.
  6. The ability to estimate rehabilitation costs more accurately.

What are the challenges in acquiring a contractor license?

#1: It takes time to be licensed

First, you must complete an apprenticeship in the trade you wish to be licensed in. This takes approximately three years. Next, you are required to choose a class and specialty.

Thereafter, register a company in the state you will be working in, depending on the requirements of your state. Lastly, you will undergo a background check and examinations on your specialty before you apply for a license. This process can take approximately five years.

#2: It is costly

You will be required to pay for several examinations, application fees, licensing fees, and contractor bonds. Moreover, you are supposed to recertify at least once every two years.

Should I Get a Contractor License?

Depending on your goals as an individual, you can choose to have a contractor license or not. Even though it is not a requirement to flip houses, it is beneficial to have one.

If your goal is to flip one or two properties regularly, you can get a contractor license. However, if your desire as an investor is to scale your business to flipping multiple properties simultaneously, you don’t need a contractor license; just hire a licensed and insured contractor.

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