Can you profitably home build without a contractors license?

Question

Is it possible to profitably build and sell houses without a contractors license? Has anyone here done this?

Jonathan Orr · Answer

@J Scott and @Rob Harris are correct.  Any city or municipality will require the work be performed by licensed professionals.  This is because of the risk of if you have unlicensed people building it and something happens to a person living in it, the city is at risk of being sued along with the builder/developer for allowing the project to happen.

You can run the project and be the developer and sub out everything from architecture to plumbers to tile guys etc... that is what I do with my developments.  However I do find it easier and more time efficent if I run point on the project and am the decision maker and let a GC take care of the construction.  Yes it does cost more but it will save you time and potentially money in the long run.

Additionally a bank won't lend for a new build with no license.

Rob Harris · Answer

J. Scott is on point. I built for a period of years myself prior to having a license. I had to hire out much of the work to folks whom held the proper licensing for the required trades in my jurisdiction/state. I got my feet wet (seasoned) in CA which is one of the toughest places to build. I now focus in TX which is MUCH more friendly when it comes to being a home builder,,,, but with that also comes the increased rick of dealing with many people who don't know what they are doing and pawn themselves off on you that they do. Many don't have insurance and ultimately you (the builder) wind up with higher risk exposure. Interestingly enough, when it comes time to correct any issues, unlicensed trades many times are in the wind and you are left with fixing it out of your pocket.

Anyway, just food for thought!

J Scott · Answer

Sure, if you hire others who have the licenses/certifications that you need in whatever area you are in.

You'll probably need a licensed architect and/or engineer for the plans, a licensed GC to pull the permits, licensed plumbers/electricians/HVAC contractors to do the mechanical work, licensed testing companies to do the various energy efficiency tests, etc.

Hire people who have the appropriate licenses, and you should be good...

Patrick Philip · Answer

@Mike Wood Thanks

Mike Wood · Answer

@Patrick Philip, In Florida, if you own the property and plan on living there, you can pull the permits if the total cost is less than $75k (which likely is not the case on a new build).  But you must sign an affidavit that you do not plan on selling the house for a duration after completion, I think its 12 months, otherwise the permits are not valid.  Since that is not your plan, you would need a GC for the build.  You would have to work out with the GC what you wanted to do yourself, and see if that works for both of you.

Here is the Florida statue that discusses the GC requirements. http://www.flsenate.gov/Laws/Statutes/2010/489.103

As for the drawings, have you thought about buying pre-made plans? They are typically way cheaper than full custom plans, and for a spec house, likely a better solution.  You should be able to find complete house plans for around $1k online.

Patrick Philip · Answer

@Geoffrey Schnake I plan to build new Single Family Homes for sale. I don't have a GC license, therefore I must hire one. I have to hire contractors for everything that a contractor is required to do. Everything else, I hope to save money by hiring handymen or even doing it myself at first. Right now, I am hung up by the expensive cost of architectural drawings. I can't even begin to price the project until I have these.

Manolo D. · Answer

@Keith Bloemendaal Hmm, interesting that GC has to pay invoices, very differently run from CA. Does the state recognize a GC to do only "Construction Management" type of work? Something around hire subs, control production/schedule, make sure everything is correctly built, that kind of stuff? I had just a city contract that did this, hired an A/E firm for plans, hired another firm for Project Management, hired another firm for Construction Management, hired us to do actual trades/work.

@Rob Harris Wow, no license for GC and framing/foundation? That's not any good, so home depot guys could technically build whole houses except for trade mentioned? That's amazing. No wonder houses are cheap ;D

Keith Bloemendaal · Answer

Every state has different laws for this, in North Carolina if the project is over $30k you must be licensed GC to do the project. I recently got myself into a little hot water with the state licensing board because I hired a GC to pull permits for 6 homes I built in last 18mo but I basically ran the jobs and paid the bills. While he was involved (his crew framed homes and he was at most every building inspection), I controlled everything. In this state, the GC has to actually run the job, contract with subs, and even run the money (pay the invoices). Luckily I had already passed my GC license when they came to investigate, but it delayed my license a few months and stopped me from starting anything new. I believe in Florida (I left there 12yrs ago, so could be different) you can build your own home, but you might be limited to how often you can do this? You can always partner with a GC and fund projects, or even better, get that license....

Geoffrey Schnake · Answer

Patrick,  tell us more about how you plan to do this. I have built several homes here in Florida,  pulling permits as the home owner. I have physically poured the slab, framed, plumbed, and wired these homes I have installed the hvac and put on the roofs. I permitted these homes as a primary  residence,  as they were for a little minute until I sold them and went on to the next. There are also general contractors that can be found that will pull a permit for a price and let you run the job. This route is not legal,  however. Yes it can be done. Tread carefully and be sure of what you are doing.

Rob Harris · Answer

@Jonathan Orr brings in some excellent added info.  One thing I learned in TX in that "Anybody" can be a contractor for any trade except Plumbing, Electrical and HVAC.  NO other trades need licensing which blew me out of the water coming from CA.. In CA you have to be licensed to do ANYTHING.!

I don't know NC contracting laws but you may want to familiarize yourself with them.

I was able to get my foot in the door with community banks in TX by showing my CA experience BUT they were still very cautious since I had never built in TX.  Having a significant track history in CA and several licenses including a General Contractors license, I got one bank to give me a shot.  Once I demonstrated that my game was tight and that I knew what I was doing and coming in on budget plus moving properties, they now LOVE ME!  They have extended me the ability to build several homes at a time since building this relationship with them.

5 Big Things banks will look for I learned are according to the 5 C's:

5 - C’s of  Bank Underwriting

C - Character   		C - CapacityC - Capital  		C - Conditions   		C - CollateralI got these from listening to a great podcast some time ago and they are a very goooood guideline!  Sorry if this veered a bit off topic, I am just passionate about helping others succeed!

C - Capacity

C - Capital

C - Conditions

C - Collateral

I got these from listening to a great podcast some time ago and they are a very goooood guideline!

Sorry if this veered a bit off topic, I am just passionate about helping others succeed!

Can you profitably home build without a contractors license?

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