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 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 home and sell it without working on it, you won’t be up against the state building contractors board (CCB). But be careful. If you think you can buy a home, 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 Building Contractors Board protects the public interest in connection with improvements to real property. The Board regulates construction contractors and promotes a competitive business environment through education, licensing of building contractors, 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 on any construction activity involving improvements to real property be licensed by the Oregon Building 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 do it themselves.
*material suppliers who receive compensation for installing or arranging for the installation of materials.
It’s not difficult to qualify for a contractor’s or developer’s license. Just take a short course that costs around $200 and learn about OSHA, the lien laws and so on; 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 that fees can be collected by the state. 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 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 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 get it to comply with state regulations.
Who does not need to have a license to work in a house?
The July issue of the Building Contractors Board Bulletin says the answer to that question is:
1. A person who works in his own home
2. A person provides materials, supplies, or equipment to whom it belongs and does not install or have it 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, either does the work himself or arranges the work with the intent to offer the structure for sale before, on or after its completion. Prima facie evidence that the intent was to offer the structure for sale is considered if the owner does not occupy the structure after completion.
4. The person who performs work in a property owned by him even if he does not live in it. And an owner’s employee can do the job.
5. A real estate licensee performing work on the structure that the real estate licensee manages under contract.
For more information on licensing, you can call the CCB at 503-378-4621. Its web address is http://www.oregon.gov/ccb.