Live-In Flips – Pros, Cons, and Tips

Live-in flips can be an excellent way to utilize your living situation to build some serious wealth. They can also be a great way to drive your significant other nuts and make you doubt your love for real estate.

As I wrap up the rehab on my 2nd live-in flip, I’d like to share a couple of tips that may help you keep your sanity if you decide to utilize this awesome strategy.

Pro: Time is on your side. As you may know, one of the massive benefits to live-in flips is not needing to pay capital gains taxes, so long as you have lived in the home for 2 of the past 5 years preceding the sale. This home sales exclusion act can save you tens of thousands as well as save you some grey hairs compared to the scurry of a traditional flip.

Con: It’s easy to put things off. Life gets in the way of finishing projects and it’s easy to justify to ourselves that the house is livable and other things are more important. I’m a serial project starter, not finisher. This can create a situation where you have lots of little things left unfinished around the house, nagging at you each time you see them. 

Tip: Finish your project before starting a new one! It always feels more appealing to start up the next big project as opposed to completely finishing off the previous one. Maybe you just laid your tile in the bathroom and it’s looking awesome, you’re ready to rock the backsplash! Wait, wait, wait, you still need to apply a coat of sealant, caulk in the edges of your tile, paint that caulk, make the one repair, etc. None of these things sound appealing, but you will be much happier with yourself in a few weeks and a few months if you COMPLETELY finish that bathroom before moving on to the backsplash. Yes, laying the backsplash is more fun, but yes, those details will remain undone for MONTHS.

Pro: You get to design your own living space! Let’s be honest, we all love before and after pics and playing Chip and Joanna. There’s no better feeling than a DIY project turning out even better than you thought, getting compliments from guests for months to come.

Con: Moving is a bear! I hate moving. We “moved in” to your current live-in flip about 6 months ago and there are plenty of boxes that have still not been emptied. Our garage is still a storage facility, ad-hoc work shop, mess. Moving every few years is certainly the largest downside of being a serial live-in flipper, in my opinion.

*****BIG TIP***** Flip on the front end. I learned this tip from none other than Mr. Brandon Turner. Having done it both ways, I can tell you that this is the most important advice for someone taking on their first live-in flip. If you find yourself a good enough deal, you can actually make this a huge cash saving strategy. On my current live-in flip, I was able to buy at $395k, put $25k and a few months of sweat in, and have the place appraise for $470k! Even though I didn’t have every detail finished, I had all the big-ticket items that the appraiser looks at updated. This allowed me to cash-out refi, and put an extra $50k in my pocket! Not to mention, I get to wake up to a beautifully updated home every morning.

Can you imagine if you did a live-in flip every 2-3 years and made about $50,000 tax free on each one? Can you imagine your nest egg in 20 years even if you only did this 4 or 5 times??

Live-in flips continue to be one of the most under-utilized strategies to building wealth when you consider the ease with homeowner financing and the tax benefits. When you start thinking about your next home purchase, consider buying that piece of %$#^!!?? that nobody even wants to check out.

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