Flipping my home to start my real estate career

[Anya F.]

I am self-employed, own my home, 100% equity, needs some repairs and owe back taxes that I pay monthly. I would like to flip my home to purchase a few foreclosed properties for investments to sale and make b&b's. Any advice? Do I need a builders license to flip? Also, besides checking into zone ordinances do I need a real estate license to run a hotel (b&b)? As we speak, I am currently pursuing my Business Degree. Trying to find out the best way to handle this situation. All advice is very appreciative.

[Robert T.]

Anya,

I'm sure you are going to get lots of different opinions here on this and my advice is probably not going to be very popular, but it comes from experience.  

I wouldn't risk my personal residence to buy flips.  I know it's tempting because I had the same question when I first got started and debated it for a couple of years.  It's especially hard if you have equity.  To be sure many people have done this and been successful.  However, I think it depends where you are in a market cycle and how cautious you are.  I know people who buy their residences when the market cycle is at a bottom and then sell them when the market cycle is at the top.  It has the advantage of being tax free income if you have owned it more than 2 years (IRS section 121).  However, life happens and I cannot tell you how many homes I bought in the Recession that people lost because they leveraged their house to buy investment property and then the market changed and they lost everything.

Life happens and you are blessed to have 100% equity.  With the market hot like it is, you can probably get the best price on your home, but if you make a mistake on one of your next purchases (and we all make mistakes) it could be devastating to not have a personal residence without a mortgage.  

Work on paying off your back taxes and be patient in acquiring real estate. 

Regarding a builder's license it depends upon the state.  Some states (CA) require that you have a license if you do more than 3 houses per year.  The standard boilerplate permit applications that most cities give you want you to have a license if you are going to sell the property in less than a year.  Regarding aBnB I suspect that will be dependent upon the city you live in.

HTH