Investor · Redding, CA · Member since 2016 · 180 posts · 102 votes
Here's the situation: we're looking to buy a primary residence that needs major work. We'll be living in it while repairing it and plan to stay for 2-5 years. This will essentially be a long term flip with the advantage of avoiding capital gains because we're going to hold it for 2+ years at least. Normally, we figure the mortgage into our holding costs when we're running our numbers on a flip. But would you do so in this case? Since it's going to be our home for a while, we'd be paying the mortgage as a standard living expense anyway, regardless of whether or not we were flipping. Suggestions?
We never considered our mortgage or utilities as holding costs when calculating our profit from a live-in flip, because as you said, we would be paying those anyway if living elsewhere.
We are considering doing the same thing in Denver. We are kind of treating it only as a semi-investment. You have to pay to live somewhere, so we aren't considering the mortgage as a traditional "holding cost". If you think you can realize a gain after the cost of repairs when you sell in 2-5 years, then recapturing the equity you paid down over those years, through your mortgage will be an added bonus.