Purchase a live in flip

[Todd Mathis]

What type of financing would I need if I want to purchase a house and live in it for a year while fixing it up? I would want to do the major rehab (Kitchen/Bath) before I move in. Is hard money my only option and then switch to conventional after that?  

[Chris Mason]

Quote from @Todd Mathis:

I plan on selling my primary residence and moving to new property. I can not pay cash for initial purchase or major rehab but have enough for down payment (20-30k) if needed. Credit is non issue. Is the FHA 203K an option or more trouble than its worth.

It'll be a bit of a unicorn hunt in this General Contractor's labor market (GCs are flush with biz right now). GCs hate paperwork, that's why they became a GC. Of all the financing options out there, inclusive of swiping credit cards, FHA 203k is often towards the top in terms of how expensive, especially if you factor in that a GC willing to deal with FHA 203k paperwork is going to charge a 30% or 35% profit margin (you can do that when you're the only bidder...), not the normal 20%.

I get that HGTV is entertaining (the name for this desire to "buy a fixer and flip it to myself as a first time buyer!" is "HGTV Effect"), but if that 5% down is a struggle, taking on a flip isn't a model match, you don't have the wiggle room for the expense overruns that have characterized this type of work since March 2020.

Almost everyone falls on their face with this, but there are some folks I know that very recently did a very kick-butt job on the "first time purchase flip to ourselves and put the extra space on airbnb" thing. I know them from IRL (married into knowing them), and we had a "oh wait I see you on bigger pockets!" conversation at one point too. Appraisal came in WAY above the ballpark estimate and expenses, they knocked it out of the park on all accounts. They had two things going for them:

1 - Liquidity. 

2 - The wife is actually a former producer on one of those HGTV shows I made fun of, she saw all the numbers, including how TV commercial revenue winds up being vitally necessary to the majority of the "as seen on TV" flip type things being viable and in the green (take anything marginally profitable or not profitable, monetize it on television or tik tok or youtube, and boom now it's viable).

I wish you the best of luck OP, but consider that maybe a "base hit" is totally fine for where you are at. People swinging for home runs need to have 2 more strikes to spare just in case, otherwise settle for the surefire "base hit" and call it a win.