Anyone out there who does a high-end live-in flip every 2 years?

11 Replies

I’m curious to hear if there are people doing this regularly and making up to the $500,000 tax-free.

I tried one but my timing was bad.  Bought in 2008, spent $275,000 on improvements.  Sold in 2011 for a $90K loss.

@Sarah Lorenz , I've never hit the $500k ceiling, but my current house will most likely hit it. 

Great, I would love to hear more about that sometime. Have you run into anyone who does one every two years like clockwork, and lives on the proceeds tax-free? I was just curious if there’s anyone who uses that as their primary strategy.

Good strategy and I have thought about it. The recent tax bill had changes in there that included changing this from 2 out of 5, to 5 out of 8. Luckily that change was removed.

My wife and I did this for 12 years, until buying our forever home last year. Best way to start from very nothing and in college to a stay at home dad to now having over twenty units! Tax deferred earnings and building up equity while living in a nicer home every few years. Would love to share any time!

It’s also the same strategy my in-laws have been using for 20+ years on their home as well as on lake homes.

I'm interested in this, but a concern I have is that taking out the loan to purchase a high end home (even purchased at a discount) would significantly increase my DTI ratio. I wouldn't want to limit my ability to finance other purchases.

@Sarah Lorenz , I'll go you one better.  If you happen to break the $500K max you can move out and convert it to a rental.  Then sell while you've still lived in it for two out of the 5 previous years.  You get the 121 primary exclusion in full.  and you can 1031 the excess and the depreciation recapture in the 1031.

I've had clients do this and the 1031 portion of their purchase buys something that they use for investment for a few years and then move into it thus converting investment to primary so they can once again take advantage of the 121 exclusion.  You don't get the full $500K in this manuever but you do still get quite a bit of benefit.  Just takes patience and planning.

 Wow, @Dave Foster That is pretty impressive. I did not realize that you could utilize a 1031 after moving out of your primary. I will definitely be taking this into consideration.  Most of the properties we are dealing with need a full renovation, and I have been thinking about the most strategic holding period to take advantage of the high appreciation in my area without needing to do a second renovation. I think it might be around 10 years. 

@Sarah Lorenz ,  It doesn't get much better than that these days.  But back in the days of yore Pre-2008 there was no proration so you could literally stack up 1031 properties and move into them one at a time and eliminate the gain entirely except for depreciation.

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