Live-In Flip

21 Replies

I just read an article by Brandon Turner about how to start investing at a young age. Loved it! Total motivation booster!

First flip was a live-in flip which is exactly what I want to do for my first investment to help get my feet wet. I'd be very interested to learn more about this flip, or if anyone has flipped a house they lived in. I would love to hear your stories and any tips you could share!

Thanks!

Matthew Ward, Contractor in MN (#BC714907)

Once upon a time... I flipped a place while living it in.

The End

@Matthew Ward

We sort of did this with our first house. We didn't flip it we turned it into a rental. We bought a foreclosure with my husbands VA loan. I called it the druggie house because it they had put priming pain on the kitchen cabinets, the garage door didn't work, light fixture removed, new carpet, backyard was a "wilderness", master bathroom tubs was cracked, needed a refrigerator and w/d, etc.

Over the year we were there we gutted it and than rented it out. Other than the AC it's bones were great and it had all new windows, roof, water heater etc! We bought it 40-50k undervalue totally fixed it up and it is a great rental/place holder for whenever my husband get military orders back to Virginia beach.

The simple answer is YES. I actually planned to do that at our next duty station.

My first house 20+ years ago was a live in flip. Back then we had to live in the house for 2+ years to beat capital gains( or so I was told), so I would buy and live in them for 2 years... It's not that way anymore.

The big thing is that banks don't want to lend on houses that need work. Also, so many HGTV and DIY channels, that hardly anyone is afraid of paint and carpets anymore.

Most people don't realize that there is hidden costs/holding costs to deal with. I asked a guy the other day.. A house is worth 100k, it needs 20k worth of work, and you want to make 25k after you sell it, so what do you need to buy it for? He took 2 secs and said "55k!" I said, "oh young padawan, let me show you the error of your ways. How about holding costs, agent fees, insurance, taxes, utilities, etc. "

As for stories:
My first house was previously owned by a father and his 30-40 something son. The father passed away, and the son was enjoying the good life of mooching for free. The kitchen was littered with beer cans stacked almost floor to ceiling, and he had a double stack of paper plates he had created a mountain of cigarette butts on. The tar on the walls was so thick you could see where every picture had been hung in the household. I could go into more of the niceties I was confronted with, but this is a family channel. Needless to say my first house was the house I found out about primers on.

I moved in on a Thursday. My dad met me at the house, and we painted one bedroom and the master half bath. While the paint was drying we yanked up the carpets, minor sweeping, and moved all of my stuff into the living room and dining room.. MIDDLE of the room, so as to keep my stuff away from the filth on the walls. Just enough to move in on that first night and not be in total filth. Friday night, my buddies showed up. We ordered up a keg, and we painted the living room and dining room and moved my furniture to correct locations in about 2-3 hours. I never saw those guys work that fast ever again!

This was also the house where I had just finished dryloking the basement, and painting it all. Was down their working out, torrential rain going on outside.. I go to do a squat, and I am standing in a puddle... Turns out the entire back yard tapered to one window. With that torrential rain, the ground didn't absorb the water fast enough so it all rolled down the hill and into my basement window. 20 tons of dirt later I had releveled the yard so that didn't happen again!

Living in a house while you are fixing it up to flip can be challenging but definitely can be done. The approach I have taken is three prong. Before moving in, I make sure it is livable (the furnace functions, water lines are secure, electricity works. In addition if I plan on knocking out a wall, I try to do that before moving in. Then it simply becomes a matter of attempting to keep the dust and dirt from construction from spreading through out the house and your belongings.

Can we get a link to Brandon's article?

Anyway you can get started, do it, however, as a full time rehab flipper myself, it us Not my recommendation on starting out. This is a business and mixing your living quarters with your business may not be the best way to go.

Time is your enemy, and living in a home doing some of the work yourself eats up time which costs you profits. While you do reap the benefits of a place to live, I believe your end result is weaker than had you do a flip without living in it. Just my one and a half cents.

@Will Barnard I get where you are coming from, and that is certainly where you want to end up. At first capital may be very tight and if you are just learning actually doing the repairs yourself at least once will teach you a lot. The main lesson you will get is to hire them out next time, but you will also learn costs, time, and materials. This will help you determine the value of a contractor and hone your BS meter. Once you've cut your teeth and made a little cash, then you can start hiring it out.


Time is the key though. You have to commit to doing the repairs. Set a schedule, get them done, follow your plan. Don't get so busy that you forget to do your own flip.

Originally posted by @John Blackman :
@Will Barnard I get where you are coming from, and that is certainly where you want to end up. At first capital may be very tight and if you are just learning actually doing the repairs yourself at least once will teach you a lot. The main lesson you will get is to hire them out next time, but you will also learn costs, time, and materials. This will help you determine the value of a contractor and hone your BS meter.

I agree, I think doing some of the work yourself on your first is a great hands on lesson of what it takes. I just do not believe that you must also live in the property to make that happen. I did plenty of the work on my first several and it was a great learning lesson. I made mistakes and did some things out of order, but that helped me to better understand the order and why so when I hired subs to do the work, I knew how to properly schedule them, how much it should cost, and how long it should take.

Thank you @Will Barnard and @John Blackman for advice and feedback!

I know it's not tradition and most investors don't suggest it, but I would really like to do a lot of the work myself (respecting my limitations of course). And the reason I thought it would be a good idea to live in the house I want to flip is so I could get a loan with only a little money down (I don't have a lot), a low interest rate, and I wouldn't have holding costs so I could take my time with renovations. I would also learn first-hand the basics of buying and selling a house. I know I still have a lot to learn so if you guys agree it's not a good idea I will highly reconsider this plan.

. . . My wife might kill me if the first house we buy isn't for us to live in!

Thanks again!

Matthew Ward, Contractor in MN (#BC714907)

Architects do this pretty frequently, but they usually build a new house of their own design, live in it for two years to get the tax free status and then sell it. You get some appreciation if you're lucky. You're moving every two years but can make a good income just flipping your own home design.

You might want to upgrade the kitchen and master bath before moving in just to make life bearable during the rest of the rehab.

Good luck.

Mathew, there are some benefits to it, and those you mentioned could work out, but don't kid yourself, you still have holding costs regardless if you live there and you have opportunity costs too which is the biggest factor. The faster you flip it, the more deals you can do in one year thereby increasing your cash on cash returns on an annual basis. That, in my opinion, is your biggest loss while using this strategy so make sure the benefits are worth that kind of loss.

Just did it for a couple of months.

Dust dust dust dust!

No matter how much you mitigate the dust factor on a constructon site you can't eliminate it! At one point I opened a closed closet and looked at what clothes I had hanging and they all looked dirty. By the end of the project you could hit my bed and see a dust cloud rise! I could feel it in my lungs also towards the end. I wouldn't do it long term!

I would put most anything you owned in storage that you didn't want to ruin. It was sort of like camping and in a way fun but it got old quick!

How do you keep motivated when doing a live in flip?  I'm struggling with that right now.  I could post in a new thread but thought it fit here too...

Just throwing this onto the table, it's also possible to do a "live in rent" if you want to consider that. It's basically a strategy where you live in one unit of a multifamily property and rent out the other units. They call it house hacking here on BP. One advantage is that it allows you to make use of the FHA loan, which has a very low 3.5% down payment. In my opinion, it's quite a secure and reliable method for starting out, which is why I'm using it to start out. Food for thought!

Thanks Joshua. That is/was my idea (- the FHA part) I'm just having trouble staying motivated. I wanted to be a lot farther along than I am. It's all a learning experience. It's still my goal to have renter's in the basement by May 1.

I used to move around in my empties when I first started to have a free place to stay, it was fine for a bit, but all that moving got old pretty quick.  I couldn't imagine living in one while the work was getting done though.  Not a big deal to paint it and such, but if you're doing the big jobs, that wouldn't be any fun at all, especially if you aren't single.  Not a bad way to go if you want to buy something a little beat up and have weekend projects (and enjoy that kinda thing- I definitely dont) and you have a full time job and do this for some extra money here and there.  I'm with Will, though, that's not a good business plan.

Keep in mind if you are doing work you could pay someone else to do for $10-$20/hr all you did was get yourself a second job making that when you're working.  If you enjoy it or that's what you'd make somewhere else, more power to you, but once you get going you don't want to be spending your time on $10-$20/hr activities. 

@Matthew Ward

Hey Matthew, I'm just curious if you've made a move yet?  If so could you share some details?

thanks

@Will Barnard   You wrote this in a previous post. "I made mistakes and did some things out of order, but that helped me to better understand the order and why so when I hired subs to do the work, I knew how to properly schedule them, how much it should cost, and how long it should take."

Do you have a guide or any references on the proper order to do things. We have run into some issues with our live in flip.

Thank you!

Originally posted by @Sara Smith :

@Will Barnard  You wrote this in a previous post. "I made mistakes and did some things out of order, but that helped me to better understand the order and why so when I hired subs to do the work, I knew how to properly schedule them, how much it should cost, and how long it should take."

Do you have a guide or any references on the proper order to do things. We have run into some issues with our live in flip.

Thank you!

That is very difficult to answer without knowing your soecific scope of work. Every job is different and as such, the order in which the work is done can vary. I don't have any guide or order list to provide to you. 

What is the name for the type of loan used to allow the live-in-flip?

Is is a FHA 203k? If so, is there an issue with me purchasing the home and renting out a bedroom while the flip is in process?

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Join the Largest Real Estate Investing Community

Basic membership is free, forever.