Live-in-Flip vs. House Hack for First Deal

[Justin Koopmans]

Hey BP!

I'm a relative newbie looking to do my first deal this year. My dad is a seasoned investor and has mentioned a couple strategies (which I've also heard about on BP) that he would recommend for my first property, and (you guessed it) they are "live-in-flip" and "house hacking." 

Just wanted to get the community's take on the options for a first deal. Obviously I understand that the pros of the "live-in-flip" strategy should (if executed correctly) give a large amount of tax-free cash when the property is sold after two years of living in it and fixing it up. And "house hacking" gives great land lording experience with minimal risk, "subsidized" living for yourself, and cash flow when you move out. 

In the long run I want to employ buy-and-hold more than flipping. So that pushes me more towards the house hacking, but I feel like the live-in-flip strategy is a really good way to start out in order to build up my business quickly... Thoughts?? 

[Mindy Jensen]

@Justin Koopmans , my investing strategy is a live-in flip, so you absolutely CAN live in a home while it is being rehabbed. I've done it 8 times and counting.

If you're low on funds, it could be a viable way to purchase a property using the FHA loan with low money down. What's to stop you from rehabbing it while you live in it, then renting parts of it out after construction - or even DURING construction as long as you are upfront about the scope of the work.

No, this strategy isn't for everyone, and that's fine. 

No, this strategy isn't scalable, either. You can't have more than one primary residence. The whole reason for the live in flip is to save money on - or avoid outright - capital gains taxes. 

But if you're starting from a place of low funds, this could be an excellent way to get into real estate investing.