BP Money: Kickstart Your FI Plans Through Live In Flipping

20 Replies

I was born in a small town in Southern Illinois. And then I moved. About 27 times, which makes moving a non-issue to me.

I bought my first condo in 1998, and very little remodeling increased the value 50%! Pocketing all that cash - and sharing ZERO with Uncle Sam - made me want to do this again. (And again, and again, and again.)

Hear how I parlayed this investment model into early Financial Independence on Episode 5 of BiggerPockets Money

Good info.  Hard to beat tax free money.  My wife and I have done about 10 live-in renovations/new construction over a 20 year period.  The first thing we always do is get 1 bathroom completely finished, then you can sleep on a blow-up mattress and eat pizza till the kitchen is ready.  Our friends and family used to think we were crazy.  But, now we have 4 properties paid for and all of those people are still in the same old house complaining about mortgage payments.  It is a slow process, but well worth the trouble.

The question I had while listening to the pod today was this; why are you not buying them and then renovating most of it (lets say kitchen and bath) and then moving in to it after 3-6 months and then finish the rest of the renovation while you are living there for the next 2 years. Does this still qualify for the capitol gains tax break?

2nd, how are you financing the construction cost. I would say I am in the process of this now however I didn't buy a distressed property. Actually it was already flipped, but it wasn't designed correctly, so we have been doing that on our extra savings as we can. More specifically, lets say I can buy a house now and I have the 20% down but am lacking the $100k for the renovation that needs to be done. What is the best way to get access to that money?

I just build new homes and move every few years. I usually sell most of the furniture too. I make money by buying low and riding the equity wave during the construction process. 

My girlfriend and I are doing this now ... similar to what Greg Parker said, sleeping on the first floor next to the kitchen while finishing the second floor. Showered at the gym until I finished tiling/grouting/caulking. HUD property with Homestyle loan for funding (I had a GC do the major work on the first floor). Sleeping right next to the kitchen isn't so bad, and showering at the gym increases the likelihood of you getting your butt there to work out. Can't wait to listen to the episode for some extra motivation and ideas!

I've been considering doing this for myself this year (I'm currently house hacking). Though curious about something: I was looking at doing a FHA 203(k) loan (or similar from a local bank), which stipulates that the work must be done to the property up front before you can move in, and you can't do the work yourself. What are your thoughts on that process for those of us who aren't quite as capable or interested in doing the work ourselves? I still think I'd be able to come out ahead with the forced appreciation, just not quite as much.

Loved this episode, always cool to hear how BP employees got their start and what niche they have found.

I've always thought that ideally you have 3 places in rotation at any given time...1 that you are in year five or six of ownership that you are looking to sell, 1 that you have renovated and lived in for at least 2 years and 1 day (and have a HELOC open), and 1 you just purchased and are fixing up with HELOC from #2.

Sounds like a spreadsheet @scotttrench could build, with a few assumptions listed...

Great stuff Mindy! You had a solid plan and stuck with it and achieved financial freedom with your husband! You and your husband created so much tax free capital gains just by working hard on each property and forcing appreciation and moving every two years.

Something that wasn't mentioned on the podcast, what were the condition of these properties? Did you finance using conventional financing? 20% down? I'd imagine most of them were livable but dated condition in good neighborhoods with good schools. What was your average repair cost over these 8 properties?

Great podcast @Mindy Jensen ! Appreciate the advice and visibility in to your success. My wife and I accidentally live and flipped a couple homes as well.

Do you believe a live and flip/reinvest into another property is more profitable than a live and flip/rent then purchase another live and flip?

Great episode! I'm really enjoying the new podcast, thanks for making it!

@Alex Corrion , the way most of these flips worked was we sold the one we were living in, then moved directly into the next one. We used the money from the sale of the first house to buy the second, etc. We could have moved into an apartment for the short term, but we're cheap frugal so that didn't factor in.

During much of this flip time, my husband was a high-income consultant for a government medical device. We lived ridiculously below our means - something around 75% savings rate. That's actually not the right way to say that because at times we were spending 100% of our income but in supplies and rehab work. We spent about 25% of our income on living expenses.

We also took advantage of the no interest, no payments (since changed to no interest, minimum payments) credit cards available through the big box stores. We would buy supplies - always enough to hit the spending minimums to get the no interest for 24 months deal, then not really have any large outlays of cash during the rehab times. Note, we HAD the money to pay off the cards, we just chose not to spend it. This is NOT a good idea for someone who does not have the cash to pay off the cards. You can really damage your credit if something goes wrong.

@Tim Burke , we just interviewed a guy for an upcoming show who did a live in flip with a 203K. I had reservations about being able to find a contractor, but there are people who specialize in 203k contracting because they know they'll get paid.

@Jeff White , all properties were in livable but very ugly condition. Average repair costs were $30-$50k. We had two outliers that were $100k rehab but returned larger profits, too. We financed using conventional or FHA loans with 20% down to avoid PMI.

@Dave Thomson , a live in flip/reinvest was a better option for us than a live in flip/rent. Remember, I didn't discover BiggerPockets until 2013.

I enjoyed this podcast, some great advice there

@Mindy Jensen that is a creative way of paying for the flip, 75% of your monthly income to saving is insane!!! Seems like there may be way, especially right now, to get a cheap line of credit that you can then later refi into the loan or something. Anyone out there get a construction loan? I am interested in what the rates and terms are. 

I am doing this right now for a flip and fix I have going, its like camping but less fun. lol

with the reduction in my housing cost, and the future tax benefit, its hard to beat though.

Best episode yet...excellent!  Scott is officially Captain Underpants.

I did two live in flips back in the day.  I did some of the work myself and subbed most of it out.  It taught me...

  • how home systems worked
  • how much stuff costs
  • where to get it
  • how to find contractors
  • how to work with contractors
  • progress towards building a team (agent, closing attorney, insurance broker, inspector)
  • the power of tax benefits
  • the power of hacking your housing (didn't know that term back then)
  • the power of real estate

The live-in flip allows you to figure this stuff out over time.  And, it made it totally acceptable to store my Harley in the living room.

Great podcast and I'm totally feeling your story @Mindy Jensen ! We lived-in flipped, and live-in BRRRed (is that how you say it??) about 10 times. And we moved in and out with our kids, and pets, and craziness, but built up a great portfolio of SFH in the process! We are also huge DIYers and YouTube is the best. I'm like you, I think I can do anything if I've seen it on YouTube! Sometimes it takes forever, and it isn't perfect, but it sure does pay off in the end! Its cool that you have started a new podcast on BP. I can't wait to hear some stories about the mobile home park...should be good for a few episodes, haha

Mindy you are so inspiring! We are getting ready to move out if California and I'm starting to look for ugly houses now! I had never even considered a live in flip bc we have 3 kids-but after hearing how you did it, I'm inspired!

Thanks Mindy

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