Live-in flip advice?

Question

Answer

I did this on my 2nd house. It needed a ton of work inside and out; I got the outside looking good on a tight budget using credit cards for materials and did the work myself. Once the outside looked good, I got an equity loan on the place...drive-by appraisal! I then used the equity loan to pay off the CC's and purchase/pay for the rest of the interior work. This was around 2002 so lending rules were quite a bit different, check to make sure there are no seasoning requirements for an equity loan or line of credit. There weren't when I bought, I think I waited only a few months to get equity out but, I'd hate to see you attempt the same thing and find out you need to own it for a year or the like.

Answer

In my opinion, this is the very best way for someone new to this business to get started in real estate investing. I know people that got started this way and it's the way I got started as well. Advantages that come to mind are....1) Securing funding for a primary residence is usually MUCH easier than for investments2) You can move as slowly as you need to with the renovations. 3) Profits are amplified by living in the project because you're saving all the money you would have to pay for other housing.The one disadvantage that my wife would want me to point out is that you have to live with a house that's in constant change (mess). She desperately wanted to "nest" but it just wasn't possible.Regarding the financing..... I would go talk to three or four of your local banks and mortgage providers. Larger banks could offer the financing you want but local banks and privately owned mortgage providers usually have more options and flexibility.FIRST...... Do your due diligence and put together a really nice, professional presentation. You need to understand the numbers and be able to convey them effectively.Good luck!

Answer

@Troy S.thank you for your input. Unfortunately we aren't offering free labor so I would have to decline your offer lol...Definitely gave me some things to think about.Have a great day

Answer

Hmm, not sure I have anything specific other than the old adage: "Buy the worst house on the best block". Also, make sure the value is there on the back end. I'd hate to see you buy a house for $80k in a $100k neighborhood and put $20k into it in materials. If you want to give away free labor you can move up here and I'll put you to work! Are you sure you (and your family) are ready, willing and able to live in a construction zone for the next few months or years? I was in my 20's when I did this (more than one house too, we did it back to back houses) but now that I'm older, no way I'd want to deal with that mess again.

Answer

I'm not a huge fan of this because a 2-3 year old remodel carries a more "used" appeal to buyers than a brand new flip. It's like buying a new car with 0 miles vs a 3 year old car with 20,000 miles. Plus your hedging time here too expecting the market to maintain or grow. Do what you have too to get into the biz but keep above in mind a 2-3 remodel is not new anymore. People want new.

Answer

I have a few recommendations because I am doing something very similar:1. Look for a property that has a decent layout - avoid anything that requires you to eliminate/move walls. Walls contain wires, pipes, and sometimes things you wish you had left buried. Less electrical work, less plumbing, less demolition equals more money for the things you really want. 2. Do as much of the work yourself as possible. If you can lay flooring and tile then you can do demolition and framing (just don't forget my first point). I bet you can also install light fixtures and hook up your sinks and toilets. If you think you can't, find a friend who will show you (or youtube).3. Put down the 20%. You wont waste money on PMI and your principal/interest will be lower than if you go with a minimum down payment option. Yes this makes it harder to get started and you may not end up on that block you had your eye on. But making your monthly debt service as low as possible will allow you to save money each month along the way that can then be used for those more expensive improvements you mentioned.4. When the project is all said and done and you are ready to move on you may be in a position to cash out/refi and use that money for your next primary residence, all while keeping this property as a rental. Just make sure your numbers work.5. Check in with @Mindy Jensen on this. She did the podcast on "live-in flips."I am speaking from my own experience - one year into a live in flip and about 87% of the work complete. Cash poor at the moment but comfortable sitting on nice equity with an easy mortgage payment that is covered by cashflow from the other rentals.

Answer

@Michael WoodwardThank you very much for your input. I'm Actually 30 pages into "The Millionaire RE Investor" so I guess I'm on the right track. Thanks again.

Answer

@Benjamin Blackburn There's no short answer to the question of how to get started. It depends a lot on the person's strategy, abilities, specific goals, tenacity, stamina, etc. There are many different ways to do it. None of them are easy or quick but the potential reward is definitely worth the effort. I always refer people that are just getting started to the best and most complete real estate book I've ever read ..... "The Millionaire Real Estate Investor", by Gary Keller. It gives a very thorough and complete road map to get you to success. There will be a lot of individual things you will need to do to make the map work (finding team members, learning your local market, etc) but it will guide you through the process. Good luck!

Answer

@Troy S.If you have some pointers they would also be highly appreciated thank you very much

Answer

@Michael WoodwardHello there Michael. I see that you got started in REI this way and I feel like this is the route I would like to take as well. I just don't think I would flip it but turn it into a rental. Right now it's Myself, lovely wife, 2 1/2 year old daughter and another girl on the way in December. Do you by any chance have any main tips or pointers you could shoot my way that would help me out with getting started? I currently rent an apartment right now and feel like I'm wasting my time with it. I'm still new to RE so I hope I'm even saying this right but.. I plan on living in it for a year or so, fix it up and pull the equity out and purchase another sfh. thank you