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.
The Benefits of Having a Contractor’s License
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:
- Property inspections and identifying potential hazards or needed repairs
- Overall repair and project cost estimates
- Renovation project timelines
With this information, you become better equipped to formulate successful business plans for flipping houses and avoid money pitfalls flippers commonly overlook and fall victim to. Without this knowledge, you must constantly rely on outside inspectors and contractors to give you precise and detailed estimates, quotes, and recommendations.
While outsourcing research can benefit one-time flippers, investors looking to flip numerous houses benefit significantly from becoming an investor contractor. This DIY approach saves money, helps investors maintain autonomy, unlocks new opportunities, and boosts their leverage.
While outsourcing research can benefit one-time flippers, investors looking to flip numerous houses benefit significantly from becoming an investor contractor. This DIY approach saves money, helps investors maintain autonomy, unlocks new opportunities, and boosts their leverage.
Saving Money
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.
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.
Maintaining Autonomy
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.
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.
Unlocking New Opportunities
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.
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.
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.
Gaining Financing Leverage
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.
How to Become an Investor Contractor
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.
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.
Helping Investor Contractors Fund, Flip, & Succeed
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.
Our fix and flip financing and construction loans include:
- Flexible short-term options
- Up to 100% of rehab/construction budget financing
- No pre-payment penalties
- 1-4 non-owner occupied unit residential, townhomes, and condos eligible
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.