Live in Flip Financing

[Adam Widder]

We are looking to do a live in flip in our current market. Here's the strategy: Purchase the home, live in until we move, place tenants, after 2 years, sell the property. The home is a 2/1 listed a 90k, I believe we will offer half of that and negotiate from there, renovate the home to a 3/2, my realtor believes ARV is 150-165 depending on how many bedrooms we put in. That being send how can we finance this?

When I spoke with a lender today, she suggested the FHA 203k loan. She stated once the home was ours under contract, the lender would appraise the home based on the after rehab status of the home, the appraisal number would be the number to determine 3.5% down. We would then get estimates on the rehab, and the lender would lend us money based on how much the rehab estimates were.

So my main point is this.  Where do we make profit? If the appraiser knows we're putting in $X plus purchase price, it will most likely be appraised at that amount, then the loan would be that much, so how would money be made on the sale?  My guess is that money is made by using less than the estimated cost of rehab?