Investor · Phoenix, AZ · Member since 2017 · 108 posts · 30 votes
We are generating about 1.5 flips a month pretty regularly. I am always looking for ways to cut cost and one of those ways is in the labor paid to contractors by hiring someone with the knowledge and experience to do most of the work, minus some of the specialty work like AC, granite slabs, etc and then paying them a salary. I project this would cut my expenses by about $10,000 per flip. In Arizona, anyone doing work more than $1,000 must be licensed contractor. Has anyone figured out a way around this law?
@Ron Hollingsworth You are looking at it backwards . I know a very sucessful flipper . He pays top dollar to his contractors and pays quickly . When he calls they are there . The contractors will put off another job to do his . If a contractor is slow and calls him , he finds them work , he has loyalty . He does about 50 a year in the DMV area . Sure he makes a bit less on his flips , but his turn around time is fast . He also buys supplies in bulk and gets a hell of a discount because he pays on the spot . The best place to cut cost is from the top down .
There are no legal ways around this that I know of. That said, I know for a fact there are countless unlicensed guys in Phoenix doing jobs under the table that are well over the $1,000 threshold. Just be careful if you go this route. A lot of times you get what you pay for and you don't have the same protections that you do when you use a licensed contractor.
If they are truly experienced, you could hire then as an employee and use them as your qualifying party to get your own GC license.
Side note - there are multiple different classifications of contractor licenses in AZ, including a handyman license which I believe raises that cap from $1,000 to $5,000.
This person would be an employee of the LLC. Payment to handyman would be in the form of a salary higher than $5,000 a month. I have no interest in getting a GC license.
No way to cheat on this, nor do you want to try. In the event of poor/dangerous/non-code work, you will end up holding the bag as the 'deep pockets guy'. And then there's the liability aspect. Most Handymen will not have the correct Liability/Workers Comp/Bond if they have it at all. They break a leg, they're coming after you dude....so you'd better have Workers Comp if you use Handymen.
And although @Ryan Normand is correct that the limit for work is under $1000, it is worded that it can only be of a'casual or minor nature' . By this, the State means things like paint, drywall, cabinets, etc. NOT electrical/plumbing/framing/roofing/HVAC.
Not worth the risk. Have the work done correctly and legally. Raise your selling price by $10k. Sleep well at night.
I appreciate your opinions and recommendations, however I am looking for a solution to my original question. If anyone has been successful, I'd love to speak with you.
I appreciate your opinions and recommendations, however I am looking for a solution to my original question. If anyone has been successful, I'd love to speak with you.
No one on this Forum is going to advise you to break the law, which is precisely what you are trying to do.
@Ron Hollingsworth You are looking at it backwards . I know a very sucessful flipper . He pays top dollar to his contractors and pays quickly . When he calls they are there . The contractors will put off another job to do his . If a contractor is slow and calls him , he finds them work , he has loyalty . He does about 50 a year in the DMV area . Sure he makes a bit less on his flips , but his turn around time is fast . He also buys supplies in bulk and gets a hell of a discount because he pays on the spot . The best place to cut cost is from the top down .
Keep in mind there is no guaranty a handyman can get the job done to the quality a licensed and insured GC can. Handymen are cheap and can for the most part do most things licensed workers can, except pull permits
I don't pull permit nor would I have need to. I've never done a flip where it would be necessary to do so. I don't do value adds. All of my rehabs are comedic. I don't run into the problems that most of you probably do. Look, if I hire a contractor, he's just going to hire a guy or multiple guys that will do the work. They are his employees. Those are the guys I'm looking for. They are going to be doing the work anyway.
Well then, start a sole proprietorship and hire them. Easy. Make sure about those permits though. Every minor flip/remodel I've ever done involves some moving or addition of electrical service. Particularly when remodeling a kitchen....new Code requires 8 (or more) separate circuits.
I don't think a sole proprietorship entity creates the type of protection; if any does, hence the reason for my question. Unless we add an appliance requiring a 30 amp, there is no need to pull permits for electrical. So far we haven't done one where we needed to do any structural changes, as I said ours have been all cosmetic.
Unless we add an appliance requiring a 30 amp, there is no need to pull permits for electrical.
Wrong. If you have an older house and need to add more Outlets/GFIs and a new receptacle for a vent hood or microwave, you will have to add breakers to your main panel. Adding new circuits requires a permit/inspection. Actually in some jurisdictions, just relocating an existing location requires a permit/inspection.
I'd bet you're doing a lot of un-permitted work that should be permitted...
This is the reason contractors dont want to work for flippers . There is more than enough work out there that pays very well we dont have to . There are NO shortcuts to hiring employees the correct way . One laborer costs the employeer a minimum of $1000 a week . ( Insurance taxes etc) Not including tools , truck , and training . Thats for a basic laborer , get someone with skill and its more .