Has anyone done a live in flip?

8 Replies

I am looking to do my first live in flip for a year. I'm a commercial banker now so usually only handle commercial transactions over $5M.

I'd like to get in a house at 5% down (conventional) and flip a house in a year. If I like it and all goes well, then I can do multiple per year. My fiancé's father and stepfather are both contractors who are willing to help pro bono!

Let me know,


@Andrew Rickli  

I know a lot of people do a live-in flip over 24 months...so that you avoid capital gains on selling the property. That's one of the main benefits. 

If you're doing multiple a year then you're just dealing with living in a construction zone, packing, and moving several times a year with the only real benefit being a lower down payment. And at several a year I'm not sure if a lender would have some type of a red flag? 

It is a good low-risk strategy (you have to have somewhere to live anyway) if you keep in mind that you are fixing this to sell, not to live there yourself, but it is not for the faint of heart. I have rehabbed a couple of homes while living in them and being surrounded by a constant construction zone will wear you down. But you can't beat the commute, ability to keep an eye on the project as it progresses, and really pare your living expenses down. 

One other thing: if there is any weakness in your personal relationship (marriage, union, live-in, whatever), this endeavor will expose it big-time. I personally know several couples who broke up/became divorced through the course of a rehab. Not saying the rehab made them divorce, but the constant stress of noise, dust, chaos, filth, and everything else will make everyone edgy, and the worst parts of your nature are bound to come out. 

@Andrew Rickli

There are people who buy from HUD who say they will live there (or their children) to get priority for the purchase. They fix it up for sale over the course of a year as I believe the deed contains o one year resale prohibition.

@Andrew Rickli , it is not for the faint of heart, and if you aren't going to use the capital gains benefits, there really isn't much upside to living in construction.

I do the live-in flip for the sole purpose of putting all that cash in my own pocket instead of paying taxes on it.

If you're interested in that sweet, tax-free growth, my answer changes.

@Mindy Jensen the advantage would be only putting down 5% as it would be considered my "primary residence"

It's 15% less down up front.....(increasing your loan amount, but not really saving you any money, just a lower initial expenditure out of pocket. )

But you could be paying 15%  in gains. Which is an actual expenditure, and will actually reduce your profits.  

There is a time value to money though- and the shorter turn around may have some benefit there. 

I'm curious as to if the lending side has any restrictions on how many low down payment primary residence loans you're able to do? 

I know many have a time frame of occupancy because their purpose is geared toward getting people into housing, not investing. 

@Andrew Rickli , I noticed you put Primary Residence in quotes. I don't know you or your plans, but want to share with you that applying for a mortgage for a primary residence, but not actually living in the home as your primary residence is mortgage fraud which is a felony.

Again, not accusing you of anything. This question comes up a lot on the forums, "Can I say it's my primary residence, but not actually live there?" It doesn't seem like you're doing much wrong, but it is a felony.

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