Are you licensed is it necessary

20 Replies

So I went to my accountant to ask how I would be taxed when I finish my first flip and he went off on a tangent and is telling me I should be licensed to flip houses. So that brings me to my questions... How many of you are licensed to flip houses, is it necessary and what kind of licenses should one have? I’m strongly considering quitting my job of 20yrs and doing this full time as I am very pleased with the results and how this first flip went.

Unless you misunderstood your accountant, you need to fire him/her and get a new one that knows what they are talking about in real estate. You do not need to hold any license to flip a house. You do need a real estate license to receive/earn real estate commissions. As a flipper, you are the owner of the property and therefore you also do not need any contractor license either as you are the owner/builder and can pull permits as owner builder and do work as owner builder. You may also hire licensed contractors and sub contractors as the owner of the business/property.

Wow he should stick to accounting and tax advice. You don't need any kind of license.

If you're going to do real estate full time, get a new accountant that works with RE investors.

@Will Barnard @Pratik P.   You guys might be a little quick on the trigger here;  in many, if not most, jurisdictions an owner can pull permits/function as a GC Only on an owner occupied property, not as an investor/flipper, and usually requires the owner to retain the home for at least a year before selling/renting, to qualify for that exemption.

While the OP may indeed need a new accountant, he doesn't even know what kind of license the accountant was referring to, apparently he didn't even ask.

You are correct I didn’t ask him to specify. Ive had some other advice I didn’t like from him before so just decided to take it to BP to get some insight.

We don't have requirements like that over here. I would talk to the city building department if needed. I'd still get a new accountant lol

You need to be owner-occupant in my city for permits, which complicates the issue. But really, that's just some crazy advice. If there were such a thing as a "flipper license" this site might not exist. I let my contractor registration and insurance expire this year because I have nothing planned in the city proper for a few years. The municipality I AM working in does not have the same requirements.

@Mike Stadel  

I don't know if I would take the advice of a free forum over a professional.  Generally as these things go, you get what you pay for.

I don't know your state laws so I would talk to another accountant if you were already unhappy with that one, but that being said your accountant might be actually doing his job and referring to the South Dakota Contractor's Excise License.  

Although you might think that only applies to a contractor, they have the following example:

Operative (Speculative) Builder (Also known as “Flipping”) A person who owns land and builds with the intent of selling the building once it is complete is an operative (speculative) builder and is a prime contractor. This includes new construction or remodeling of existing structures. This person must have a contractor's excise tax license whether they do the construction themselves or hire someone else.

Read more here: https://dor.sd.gov/Taxes/Business_Taxes/Publications/PDFs/CETGuide.pdf

Cheers!

There is no license to flip houses. That's bad advice. You can get a GC license or a realtors license, but neither is required. Especially if you hire all your own team. I'm a GC, not because I flip my own properties, but I do a lot of work for other clients besides myself. So for me, it is a requirement. Doing it for yourself, anyone has the ability to flip. Good luck!

Originally posted by @Will Barnard :

Unless you misunderstood your accountant, you need to fire him/her and get a new one that knows what they are talking about in real estate. You do not need to hold any license to flip a house. You do need a real estate license to receive/earn real estate commissions. As a flipper, you are the owner of the property and therefore you also do not need any contractor license either as you are the owner/builder and can pull permits as owner builder and do work as owner builder. You may also hire licensed contractors and sub contractors as the owner of the business/property.

Not in Oregon you need a license to flip houses.. its called a developers license.. I have been round and round with the state on this one and paid a few fines.. Now you don't need to take a test but you need to pay the fee and you need to have a bond.. AND insurance.

if you don't its a 5k fine ( which I have incurred LOL)  before I knew I needed this.  and if your ever in litigation over a defect of any sort any decent Oregon lawyer will determine your not licensed and you lose pretty much hands down.

further to add to frustration.. you need one for every single LLC.. and since I have 14 LLCs my main one which is me personally has the developers license and owns 50% of each of these others.. NOOOO that still does not cut it. the LLC needs the license and bond as well.

its not like being a GC.. which is my next move..

so this is very much state specific..  

Originally posted by @Kuba F. :

@Mike Stadel  

I don't know if I would take the advice of a free forum over a professional.  Generally as these things go, you get what you pay for.

I don't know your state laws so I would talk to another accountant if you were already unhappy with that one, but that being said your accountant might be actually doing his job and referring to the South Dakota Contractor's Excise License.  

Although you might think that only applies to a contractor, they have the following example:

Operative (Speculative) Builder (Also known as “Flipping”) A person who owns land and builds with the intent of selling the building once it is complete is an operative (speculative) builder and is a prime contractor. This includes new construction or remodeling of existing structures. This person must have a contractor's excise tax license whether they do the construction themselves or hire someone else.

Read more here: https://dor.sd.gov/Taxes/Business_Taxes/Publications/PDFs/CETGuide.pdf

Cheers!

sounds like the same laws in Oregon.. its just we don't know we need them .. I did not know until I got tagged for it.  

Originally posted by @Jim K. :

You need to be owner-occupant in my city for permits, which complicates the issue. But really, that's just some crazy advice. If there were such a thing as a "flipper license" this site might not exist. I let my contractor registration and insurance expire this year because I have nothing planned in the city proper for a few years. The municipality I AM working in does not have the same requirements.

In Oregon you need a flippers license  its called a developers license and I have one.. its required if you are buying even one property for the purpose of resale .. you don't need it if your a GC.. I know most don't know this but its the rules.. I have been fined twice on it LOL..

@Mike Stadel Did you research this at all online??

Your accountant may be wrong... but I would always go onto your state's licensing sites to check, even after getting advice here. Better to check for yourself.  

@Mike Stadel

Yes, your accountant and @Kuba F is probably right about getting a South Dakota Contractors Excise Tax license. Source, I used to work for the SD Dept of Revenue and oddly enough, managed the staffer who wrote that document Kuba F linked to.

There is no "flipping license".  You can buy and sell properties representing yourself (you just won't get paid a commission without a real estate license).   A real estate license will make selling the homes easier, just make sure you get with a broker that will allow you to sell your own homes.

Originally posted by @Jay Hinrichs :
Originally posted by @Will Barnard:

Unless you misunderstood your accountant, you need to fire him/her and get a new one that knows what they are talking about in real estate. You do not need to hold any license to flip a house. You do need a real estate license to receive/earn real estate commissions. As a flipper, you are the owner of the property and therefore you also do not need any contractor license either as you are the owner/builder and can pull permits as owner builder and do work as owner builder. You may also hire licensed contractors and sub contractors as the owner of the business/property.

Not in Oregon you need a license to flip houses.. its called a developers license.. I have been round and round with the state on this one and paid a few fines.. Now you don't need to take a test but you need to pay the fee and you need to have a bond.. AND insurance.

if you don't its a 5k fine ( which I have incurred LOL)  before I knew I needed this.  and if your ever in litigation over a defect of any sort any decent Oregon lawyer will determine your not licensed and you lose pretty much hands down.

further to add to frustration.. you need one for every single LLC.. and since I have 14 LLCs my main one which is me personally has the developers license and owns 50% of each of these others.. NOOOO that still does not cut it. the LLC needs the license and bond as well.

its not like being a GC.. which is my next move..

so this is very much state specific..  

I had no idea Oregon was this way.  Please don't let them tell this to California!

@Mike Stadel it is possible he means licensed to do specific type of work. Some electrical, plumbing and HVAC requires a licensed professional if it is not owner occupied. Did you pull permits for your work?

I believe he is referring to the excise tax. I didn’t pull any permits for this project, figured I’d jump in get going an ask for forgiveness later on this project since It was the first one and I was kinda feeling it out being the first one.

Thanks everyone for the input really appreciate it. I will do some research with the city now that you all have broadened my view on this.

So I stand corrected, I did not really se so many jurisdictions require some type of permit or special license and I didn’t bother to look at the original poster’s location. My advice would only stand if in CA or other states/jurisdictions where such licens scare not required of an owner/Builder.