Are “Live in Flips” really worth it?

Question

Mike Cumbie · Answer

Hi @Logan Jorns

It depends alot on your personal preferences and those of the people you live with. I know If I told my wife we were living among sawdust, tools and caulk getting stuck on the bottom of her slippers....... I would be coming up with a new plan :)

But if I was back in the day where it was just me (and I wasn't as spoiled as I am now with running water/TV/Internet and electricity, I'd have a cot up in a room with an extension cord running a fan so I could sleep.

So it all depends on your comfort level.

Mindy Jensen · Answer

@Logan Jorns , if you're making fairly low profit, then no it isn't worth it. I'm looking at $100k profits, and in my mind, that makes it totally worth it to avoid paying those taxes. Plus, you have to live somewhere.

I like the unhurried 2-year timeline of a live in flip. I also did the bulk of my live in flipping pre-kids, which makes a HUGE difference.

Senthil Akasham · Answer

@Logan Jorns, if I understand you correctly, I think you want to continue with the flipping business, but you're also looking for a way to defer paying capital gains taxes without having to wait two years to sell, correct?  Why not do a M453 (monetized installment sale)?  You can sell your property now (or whenever you want) and defer capital gains taxes for 30 years.  I'm a flipper too, and that is what I just did to sell my own rental property.

Teri Feeney Styers · Answer

@Logan Jorns early on in our marriage a live-in flip was the only way we could afford the size of house (4 kids) and big garage (car guy hubby) and land (small time farmers at heart) that we wanted but couldn't afford to buy already done. We did it because we had to do it - and over time parlayed ourselves into bigger and better places. Not only did it help us out financially, but it set a great example for our kids who saw us working hard and doing it ourselves. Now all of them own houses and aren't afraid to tackle both the big and small projects.

Max T. · Answer

It is a great strategy for a certain stage of life (before a family with kids). I did 2 of these. First one was when my then girlfriend (now wife) moved in with me. 2nd one was the next house we bought together. Also we did a hybrid strategy - we haven't sold these properties, just kept them as rentals.

We're not up for it again now that we have a little one. But the equity we're holding in those 2 properties is nice, and allows me to tap it with a HELOC when an opportunity arises.

Jay Hinrichs · Answer

@JD Martin  to me you do both.. you got to live somewhere right.. I think @Mindy Jensen is the queen of this model .. maybe she will chime in. !!

JD Martin · Answer

I think what you are asking is if the opportunity costs are lost by waiting two years to avoid capital gains tax - no good answer. If you are making $20k on the flip and can't do anything else until you move it, probably not worth it. If you are making $200k? Probably worth it.

Brandon Reed · Answer

And remember @Logan Jorns, living in your flip doesn't have to mean you live amongst complete rubble and sawdust :). You can get somethign that takes a bit less work. Maybe something that requires mostly cosmetic updates that you could do yourself!

My opinion is that there is actually a lot of money you can save by living in your investment property. The savings can go far beyond saving on CG taxes. I'm sure you've seen this as well...but another strategy can also be living in a MF unit so that others pay your mortgage as you live. If you add up mortgage payments up over 2 years that's sginificant savings!

But I also echo Mike's comments above that only you can truly determine if it's "worth it" or not. The amount of money you save could not outweigh the sacrifices to you in your specific situation, but for others the sacrifice may be well worth it.

I would advise that you chart out exactly what amount of money savings would make it "worth it" to you. Then chart out what sacrifices you would be making to accommodate this strategy. Weigh those two things out against each other and see which wins!

Hope that was helpful. Best of luck to you!

Are “Live in Flips” really worth it?

Most Popular Reply