Why the Live-In Flip is the Best Investment During a Recession

[Lorenzo Wright]

This may not be the best strategy for someone with a 10+ property portfolio, but for someone starting out the live-in flip is a great way to begin a real estate investing journey.

1. 1 With only 3.5% down required for an FHA loan, the cost of entry for someone starting out is reduced. Let alone other zero down programs like VA.
2. 2. While you live in the home you can make improvements as time and budget allow, and it’s a great time to start flexing DIY muscles to cut even more costs.
3. 3. In a bear market (who knows how much of a bear this is going to be) it is much easier to weather the storm and hold onto a house that is your primary.
4. 4. The exit strategies…this is where I think the live-in flip really shines.
   1. Traditional flippers are usually taxed on the income from a flip at their current tax bracket….If you have lived in the home for 2 of the last 5 years however, and you sell, you pay no taxes on the gains (with some limitations).
   2. You can convert the home to a rental. Now I’m not talking accidental land lording, but a very intentional move. Prior to buying a house analyzing the rental market and ensuring that the true cashflow (rents – ALL expenses) meets your criteria. This is my preferred strategy. Interest rates on primary residences are typically lower than investment properties….and that rate doesn’t change once you convert it to a rental.
   3. The "extended" BRRRR. If you purchased a home with a VA or FHA even with the value added from the live in flip you may not be able to do a cash out refi due to most banks wanting 75 to 80 LTV. However, if you let that property sit for a couple more years, then the debt paydown on top of the value-add form the live-in flip will usually net you a chunk of change.

One last thing, for this to work you still must buy well. If you over pay for the property then it’s not going to get you much. This is a very forgiving strategy and one that I think new investors should really consider.

Tell me what you guys think!!! What are your plans for the big bad bear market?