Flipping, the real estate investment vehicle where you buy a property below value and soon sell it for a profit, is a great way to generate positive cash flow. Cash flow is important if you want to pay the bills and feed the family. Flipping has become big business. I encourage my protégés to buy and sell for a profit without going into the rehab business if their goal is to be investors.
In Oregon, you have to be careful how you proceed with a flip. If you buy a house and sell it without working on it, you won’t be facing the state building contractors board (CCB). But be careful. If you think you can buy a house, remodel it, and then sell it, you can, if you have a general contractor’s license or a developer’s license. In other words, it is regulated by the state. The purpose is to offer some semblance of consumer protection.
The stated mission of the CCB is:
“The Construction Contractors Board protects the public interest in real property improvements. The Board regulates construction contractors and promotes a competitive business environment through education, licensing of contractors, dispute resolution and law enforcement.
A general contracting license that allows you to do the work yourself on a home you plan to buy, fix up, and sell. A developer license will allow you to buy, hire contractors to do the rehab, and sell.
Who needs a license?
According to the CCB:
Oregon law requires that any person working for compensation in any construction activity involving improvements to real property be licensed by the Oregon Construction Contractors Board (CCB). This includes roofing, siding, painting, carpentry, concrete, on-site appliance repair, heating and air conditioning, home inspections, tree maintenance, plumbing, electrical, floor covering, manufactured home installations, land development, and the most other construction and repair services.
A CCB license is also required for:
*those who buy homes with the intention of fixing them up and reselling them, even if they don’t build them themselves.
*materials suppliers who are compensated for installing or arranging for the installation of the materials.
It is not difficult to meet the requirements for a contractor or developer license. Just take a short course that costs around $200 and learn about OSHA, lien laws, and whatnot; there is very little on how to be a carpenter, etc. Then you run a test that adds an additional $50 to $100. The test is designed, like most state tests, so the state can collect fees. You can get over it. When I first got licensed, all I needed was a bond and liability insurance, which was about $125 if I remember correctly, and $50 for the state license, and I was a contractor, I didn’t have to take any course or exam.
The hard part of the process now is getting liability insurance that you can afford. My insurance broker, Bob Gorham of Century Insurance in Bend (541-382-4211), has done a good job for me in the past. The insurance part of the equation is difficult, but you must obtain it to comply with state regulations.
Who does not need to have a license to work in a house?
The July edition of the Bulletin of the Board of Construction Contractors says the answer to that question is:
1. A person who works at home
2. A person furnishes materials, supplies, or equipment to whom it is due and does not install or have installed for compensation.
3. An owner who arranges for a licensed contractor to perform the work. But this exemption does not apply to a person who, in pursuit of an independent business, does the work himself or arranges the work with the intention of offering the structure for sale before, at or after its completion. It is considered prima facie evidence that the structure was intended to be offered for sale if the owner does not occupy the structure after completion.
4. The person who performs work on a property that they own, even if they do not live there. And an owner’s employee can get the job done.
5. A real estate licensee performing work on the structure that the real estate licensee manages under contract.
For more information about licensing, you can call the CCB at 503-378-4621. Its web address is http://www.oregon.gov/ccb.