Questions for Experienced BRRRR people

[Joshua Cole]

Essentially, I am a rookie investor in NC. I want to BRRRR properties in and around Charlotte area. The issue I'm running into is the NC law that says you basically cant DIY anything that you plan to rent. You can only DIY one property, the property that you live in, and then must wait a year before renting. The one year delay includes house hacking as well. You can only DIY cosmetic things, like floors, countertops, windows, etc... But if I wanted to do a real value add, like taking out a wall to extend a kitchen and add an island, even if there is no plumbing or electrical in it, you still must use a licensed contractor. Something as simple as sealing a concrete basement and adding dry wall, contractor... It seems that even if you're experienced in these fields, that experience is essentially worthless apart from assessing contractors. And if you chose to owner occupy, you would surely lose more money paying the full mortgage and renovation loan for 12 months + rehab time as opposed to just contracting it.

So my question is, how do you get around this? I understand this law is very similar in other states as well, yet I hear stories of people all the time doing major renovations on their own. Are they just unaware of the law and getting lucky no one found out? If they are, I'm assuming they're probably not getting permits either. The only viable solution I see is that you absolutely have to work with contractors. So you just have to take money, time and risk with each one to build a network of them. And get used to do nothing on your own other than cosmetic rehab. Another answer I would be interested in is how to value add without any of the major rehabs (plumbing, electric, structural, hvac). Any advice is greatly appreciated, sorry for the novel.  

[Judith Sullivan]

Joshua, 

A lot of investors are doing unpermitted repairs. A good agent will request permit records prior to representing a buyer's offer, but many agents don't ask. I represented the buyer for a house that had a whole bathroom installed without a permit...my buyer was able to terminate and get their due diligence fee returned. Seller had to ask forgiveness from the county, pay the permit fee, hired a licensed plumber to review the work, but the seller was not forced to rip out the bathroom. They eventually sold the house to another buyer. So yes, I think lots of flippers are rolling the dice and getting away with unpermitted work.

Adding electrical, plumbing, and HVAC requires a permit. Repairing those things does not always require a permit. Depending on your price point, you may not need to have brand new HVAC, electric, and plumbing--just functional and reliable.

The best bang for your buck is to update colors and styles. Flooring, paint, hardware, light fixtures, outlets and switches, windows, roof--that's all cosmetic and doesn't require a permit and those things go a long way to increasing the value of a house. Lots of investors are using a GC only for those specific issues that require a permit. Otherwise, they are doing their own work/using their own subs for the cosmetics.

Buyers shop emotionally and when it looks pretty and stylish, they want it. I also recommend making sure your realtor has professional photography and stages the property.