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Flipping/Rehabbing/Remodeling and the CCB

We’ve discussed this before ( I think I am going to adopt the phrase “home rehabber” instead of flipper to my personal activities) but if you are considering getting into the rehabber/flipping business in Oregon, you’re going to have to be a licensed contractor. For the purposes of our home rehabbing, I am the managing member of Sapphire Development LLC (CCB #176425).

Who Needs To Be Licensed

http://www.oregon.gov/CCB/Licensing_I.shtml#Who_Needs_To_Be_Licensed

Oregon law requires anyone who works for compensation in any construction activity involving improvements to real property to be licensed with the Oregon Construction Contractors Board (CCB). This includes roofing, siding, painting, carpentry, concrete, on-site appliance repair, heating and air conditioning, home inspections, tree service, plumbing, electrical, floor covering, manufactured dwelling installations, land development and most other construction and repair services.

A CCB license is also required for:

  • those who purchase homes with the intent to fix them up and resell them, even if they do not perform the work themselves.
  • material suppliers that receive compensation for installing or arranging the installation of the materials.

The cost of being legal is so much higher than floating under the radar and hoping nothing goes wrong or you get caught. With Sapphire Development as the deeded property owner everything is more expensive. The property insurance is more than double what I would expect to pay if the deed were in my personal name. Sapphire has a construction loan which cost 2% in points. It’s a whole different world. This is the first time that I have been involved in a construction loan as we bought our last house on contract.

 

15 Comments on “Flipping/Rehabbing/Remodeling and the CCB

  1. I would be curious to see an in-depth analysis of the total cost of this investment, and the real ROI. It would also be interesting to see what costs vary from what you expected, as that happens.

  2. “Oregon law requires anyone who works for compensation in any construction activity involving improvements to real property to be licensed with the Oregon Construction Contractors Board (CCB). This includes roofing, siding, painting, carpentry, concrete, on-site appliance repair, heating and air conditioning, home inspections, tree service, plumbing, electrical, floor covering, manufactured dwelling installations, land development and most other construction and repair services.”

    Hilarious! The “landscape design” industry is also now lobbying the state legislature for a law stating anyone who cuts grass for money be licensed. What’s next, requiring a license for spreading bark dust?

    There are numerous ways to flip, or as you like to say, Charles, “rehab” houses. At the lower end of the market, many (most?) flippers do not use overpriced contractors, but, like me, they do much of the work themselves or hire someone who doesn’t gouge them. I don’t need to hire a licensed dolt to trim a tree for me, or lay a floor, or fix a p-trap.

  3. Bob and Wang, ROI would be interesting but I don’t think I will be making the full financials public until the run-up to the IPO.

    Savanah is spam but at least on topic.

    At the lower end of the market, many (most?) flippers do not use overpriced contractors, but, like me, they do much of the work themselves or hire someone who doesn’t gouge them.

    Assuming you mean unlicensed flippers they are all breaking the law (though that is not exclusive to just the “lower end”). The flipper and everyone they hire has to be licensed. Don’t take my word for it, confirm with the CCB if you have any questions. Tiffany, do you get permits for your flips when needed?

    I don’t need to hire a licensed dolt to trim a tree for me, or lay a floor, or fix a p-trap.

    You do if you are not living in the home as your primary residence. I didn’t write the laws but that’s what they say. Maybe the CCB or the licensed dolts out there would like to comment?

  4. Dismal case shiller report ignored by blog owner
    Check.
    Septic tanks.
    Check.
    Post on “regulations”.
    Check.

    Next up: a three parter on disconnecting your down spout.

  5. A Special Episode of Flip This House with Armando Montelongo on A&E is coming to Los Angeles. Do you need expert real estate investing advice? Are you stuck mid-flip with renovations incomplete and fears that you’ll never be able to sell your property? We’re looking for flippers-in-trouble to appear in a special episode of Flip This House. Participants will receive expert financial, construction, and renovation advice as well as some free products and materials to help finish the flip.
    Attend one of the Southern California American Entrepreneur Seminars June 5-7 to learn more about house flipping investments from Armando.

  6. Case-Shiller should be on every realtor’s radar. It’s one of the best, if not best, RE market indicator. Don’t worry, I think only Del Sid mentioned it of all the multiple RE blogs I visit. Ron Ares/REPDX even is resisting. Wonder who will report the dismal May RMLS numbers next week?

    Charles, remember that article I sent you from the Portland Tribune referring to the rehabber who rehabbed w/out permits? I thought maybe it would make a good topic. Also, I am still curious as to where the buyer’s agent’s responsibility lies in helping someone purchase a home with extensive un-permitted work.

    Thanks, bearlee

  7. typo: Salvador Del Cid, not Sid. Sorry Salvador.

  8. Case-Shiller comes out the last Tuesday of every month. There has been a more recent report on May 27th. It shows a continued decline.

  9. Check today’s post. I did miss the May 27 CS report. Feel free to ‘Suggest a Topic’ on the left hand side of the blog or comment if you think I missed something. No need to be snide about it. I’m not trying to hide anything but can’t be in every place at every time.

    bearlee, It is entirely possible that an agent that doesn’t look at PortlandMaps to discover that there are no permits or open permits may find themselves in the ringer, especially as Realtor Vision suggests that we (Realtors) see things the public doesn’t.

    A buyer then has to decide if they care that the remodel was done without permits once armed with the information. Question of whether a permit was required? The CCB and City are sure to be able to offer guidance.

    This is the story bearlee references:
    http://www.portlandtribune.com/news/story.php?story_id=32036. Pretty much speaks for itself.

  10. “I don’t need to hire a licensed dolt to trim a tree for me, or lay a floor, or fix a p-trap.”

    You do if you are not living in the home as your primary residence. I didn’t write the laws but that’s what they say.

    That’s what “they” say, huh Charles? And what percentage of rehabbers/flippers do you think does this? And who is dumber, the gal who pays some hairy palooka 40 bucks an hour to trim the tree on her rental, because he has a “license” that says “arborist: approved by the state”, or the gal who believes in her own talents to chew gum and breathe at the same time and does it herself, risking the the ire of the Tree Police?

  11. Tiffany, correct me if I am wrong, to paraphrase your comments: The laws are wrong/stupid so you don’t follow them since it is easier to beg forgiveness and pay the fine than it is to remain within the framework of the law and spend a little more money.

  12. Charles – Forgive me if I’m being thick, but let me paraphrase your position: Laws are laws, regardless if they are immoral, wrong, unethical, etc.. It is better to follow the law than it is to use one’s common sense, and it is better to pay more than it is to pay less, even if that means paying for inferior work. Let me guess, you voted for Bush?

  13. I did NOT vote for Bush on two different occasions in two different national elections.

    Tiffany, you choose to follow the laws you like and ignore the ones that you think you can break without getting caught because you don’t like them because they are “immoral, wrong, unethical, etc?” If you can do the work so much better to avoid inferior results, why not have the CCB license (time? it’s stupid? if you followed the law the cost of doing would cut into your profit?)? It sounds like the laws are made to protect the consumer from people like you. You may build a perfect product but you don’t get to certify it too.

    Do you get permits for your projects when they are required?

    Don’t get me wrong. Some of the laws are a pain in the ass but I do endeavor to follow them. I could take a more active role in lobbying but I don’t. I also know that readers are going to hold me to a higher standard because I am a Realtor, this is a public forum and I am a licensed contractor.

    I could save money on the NW Hoyt house by 1) scraping and sanding the lead based paint onto the ground, 2)not having a CCB license and the requisite insurance, 3)not have a registered LLC to conduct business under, 4)not bother with permits and forget about Historic Design Review for the exterior stuff. That’s just a partial list. The cost of doing the above right? Over $20,000 plus time. The cost of getting caught by ignoring the above is probably considerably less. So yes, following the law does kind of suck.

    This whole thread is based on the intent to resell or doing things for others. I belive that Tiffany has portrayed herself as a flipper/rehabber/what-have-you and therefore has the intent to resell. If this is not the case, everything regarding licensing and what you can do yourself changes(you still need permits when required and can’t send LBP flying).

    If you have a question about this, contact the CCB or the city permit office for your jurisdiction. For Portland: http://www.PortlandOnline.com/bds.

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