Investor Contractors: The Perks of Being Your Own General Contractor
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When it comes to new builds or home renovations, 69% of homeowners report poor contractor performance as the single greatest reason for underperformance. As the liaison between a project owner and the various trades involved in completing a home project, general contractors (GC) carry a heavy responsibility regarding decision-making and the overall success of a property. Because there is so much responsibility, many residential flippers decide to take the steps necessary to become their own investor contractors to maintain greater control over their investment.
While you may be able to legally take on some construction projects without a contractor’s license, becoming licensed as a general contractor for flipping houses enhances your credibility and skillset within the real estate market. Investor contractor licensing comes with several additional benefits, including a greater knowledge of:
It’s no secret that GCs upcharge for materials and labor, and it’s not an inherently immoral practice. After all, how else are they expected to turn a profit? However, it can become very expensive when you don’t understand how much a GC is upcharging you.
While some GCs may upcharge 15% on labor and materials to make the job worthwhile, other less honest GCs may try to extend timelines and overcharge for materials to the tune of a 40 to 50% upcharge. By getting licensed and becoming an investor contractor, you eliminate the 15-50% upcharge fees associated with outsourcing a GC.
When you’re your own investment and rehab contractor you maintain full control over the project and decision-making. As the GC, communication funnels become smaller, meaning budgets, instructions, and plans are less likely to go overlooked or be misunderstood.
With more control and concise communication on the job site, investor contractors are less prone to fall victim to “scope creep.” Scope creep is when you’ve set a clear project milestone, but your GC keeps extending the deadline and asking for more material.
For example, say you set a project milestone: “Re-lay the granite kitchen countertops and refinish its cabinets.” However, when your GCs team removes the old granite, they discover rot in the wood underneath. To complete the original milestone, the GC decides to extend the deadline and rip and replace all the cabinets underneath.
As an investor, these decisions cost you thousands of dollars without any insights or the ability to pivot. However, investor contractors with full autonomy over the project can research alternative options based on the established budget, timelines, and goals or adjust the milestone altogether.
As of June 2024, the U.S. housing market inventory was short 4.5 million homes. With this supply and demand imbalance, the prospect of building new construction projects to meet the demands for new homes is more appealing than ever. As an investor contractor, you unlock new opportunities within the new build markets.
With hundreds, if not thousands, of new construction jobs on the agenda for cities nationwide, your credentials, experience, and knowledge will give you leverage over other investors. Additionally, a GC license streamlines the entire new build process, giving you the authority to pull building permits on your own.
A GC license can also give you the upper hand with financing. With most of their liquidity tied up in real estate projects, fix and flip and new build investors often rely on short-term loans from private lenders to win, build, renovate, and sell properties successfully.
Certain lenders, like FACo, view investor contractors who are fully licensed as more authoritative and experienced borrowers. This can give you leverage when it comes to interest rates and the size and number of loans you can be approved for at once.
Requirements for a GC license vary by state. Typically, states require proof of education, relevant work experience, and passing of multiple exams. The learning curve for becoming a GC can be steep, with some states requiring two- to four-year training programs. However, to reap the benefits of GC licensing (especially saving money!) you need to know what you’re doing, what to look for, and how to solve problems efficiently and effectively.
Luckily, some states have reciprocity agreements that allow licensed GCs to operate in other states. For example, Florida has reciprocity agreements with North Carolina, California, Louisiana, Mississippi, and Georgia.
Visit your state’s Licensing Board for General Contractors website to learn all GC licensing requirements.
Finance of America Commercial (FACo) offers the most reliable and flexible short-term loan options on the market. As a company determined to help investors bridge the housing shortage gap, we appreciate the ability to help licensed GCs build, renovate, and sell homes to meet consumer demands and scale their businesses. Even if you’re not an investor contractor, we have financing options that suit your needs.
Our fix and flip financing and construction loans include:
It’s no wonder investors and contractors trust FACo as their top real estate investment capital partner. If you’re a general contractor interested in flipping houses or financing a new build, let FACo help you unlock new opportunities and success. Schedule a FREE consultation by CLICKING HERE.
An investor contractor is a real estate investor who also manages or performs construction-related work on investment properties. Many investor contractors hold a general contractor (GC) license, allowing them to oversee eligible renovations, coordinate subcontractors, and manage construction projects. This approach can provide greater control over renovation costs, schedules, and project quality when flipping houses or developing new residential properties.
A general contractor license is not always required to invest in or flip houses. However, licensing requirements depend on state and local laws, the type of work performed, and whether the investor manages construction directly. Certain renovations and specialized trades may require licensed professionals. Investors should verify local contractor licensing and permitting requirements before beginning a fix and flip project.
Acting as your own general contractor can provide greater control over renovation budgets, subcontractor selection, construction schedules, and project decisions. Investor contractors may also reduce certain management expenses by coordinating work directly. However, these benefits come with additional responsibilities involving permits, inspections, safety compliance, and contractor supervision. Successful project management requires relevant experience and careful planning.
Acting as your own general contractor may reduce project expenses by eliminating some fees associated with hiring an outside GC. However, actual savings depend on project size, subcontractor pricing, material costs, and the investor's construction experience. Investors must also account for insurance, licensing expenses, and the value of their time when determining whether self-managing construction will improve profitability.
Becoming a licensed general contractor typically involves meeting state-specific education and experience requirements, passing applicable examinations, and completing a licensing application. Some jurisdictions also require proof of insurance, bonding, or financial qualifications. Real estate investors interested in obtaining a GC license should consult their state's contractor licensing authority to understand the necessary qualifications, fees, and ongoing compliance obligations.
Investor contractors may be responsible for creating construction schedules, coordinating subcontractors, managing project budgets, obtaining permits, and ensuring work meets applicable building and safety standards. They must also monitor construction quality, communicate with suppliers, and address unexpected problems. Depending on local regulations, specialized work such as electrical or plumbing installations may still require separately licensed professionals.
Yes, a licensed general contractor may be able to manage their own residential new construction project, provided their license classification and local regulations authorize the work. Investor contractors can coordinate site preparation, construction crews, inspections, and project timelines. However, ground-up development also requires careful planning for zoning, architectural designs, land conditions, permitting, and construction financing.
A general contractor license may strengthen an investor's financing application by demonstrating relevant construction knowledge and project management experience. However, licensing alone does not guarantee loan approval, lower interest rates, or higher loan amounts. Finance of America Commercial (FACo) offers Fix and Flip and New Construction loan programs for qualifying investors, with eligibility determined by borrower qualifications, property characteristics, project experience, and underwriting requirements.
This content is for informational purposes only and should not be construed as investment or legal advice. Neither the author of this content nor Roc360 assumes any liability for actions taken or not taken based on information contained herein. Investments involve risk, including potential loss of principal. You should consult a qualified professional before making financial decisions.
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