Make Money with Real Estate | Live-in Flip
Another strategy that real estate investors use to build wealth in real estate is buying a single-family home, living in it for 2 years, and renovating it while living in it. This strategy is known as the "live-in flip" strategy.
The live-in flip strategy involves buying a single-family home, moving in, and renovating it while living in it for 2 years. The investor can take advantage of the tax benefits of being a homeowner, such as the mortgage interest deduction. Additionally, the investor can also take advantage of the capital gains tax exclusion, which allows homeowners to exclude up to $250,000 of capital gains from the sale of their primary residence ($500,000 for married couples) as long as they have lived in the home for at least 2 years.
During the 2 years that the investor lives in the home, they can make renovations and updates to the property that will increase its value. This can include things like updating the kitchen and bathrooms, adding a deck or patio, or finishing the basement. Once the 2 years are up and the investor is ready to sell, they can sell the property at a higher price, potentially making a significant profit.
This strategy can be particularly beneficial for investors who are handy with tools and have a good eye for design, as they can save money on labor costs by doing the renovations themselves. Additionally, living in the property while renovating it allows the investor to get to know the neighborhood and understand the local market, which can help them make more informed decisions when it comes to buying and renovating properties in the future.
It's worth noting that the live-in flip strategy is not without its risks. The market can change and the investor may not be able to sell the property for as much as they had hoped. Additionally, the renovation costs may be higher than anticipated, which can eat into the investor's profits. Therefore, it's important to do thorough research and have a solid plan in place before taking on such a strategy.
In conclusion, the live-in flip strategy can be a great way for real estate investors to build wealth in real estate. It allows investors to take advantage of tax benefits and increase the value of the property through renovations while living in it. However, it requires some level of commitment, like becoming a homeowner and being responsible for the property and the expenses that come along with it. And also, it's important to consult with a real estate attorney and/or tax professional before making a decision to invest in real estate.
Example
You purchase a fixer-upper home for $150,000.
You live in the home for 2 years and make various renovations and improvements, such as updating the kitchen and bathrooms, painting, and landscaping.
You spend $50,000 on renovations and improvements.
After 2 years, you sell the home for $250,000.
Your total profit from the sale is $250,000 - $150,000 (purchase price) - $50,000 (renovation costs) = $50,000.
Dont forget this is just profit, but your cash back in pocket would be: $250,000 - $150,000= $100,000
Note: This is a hypothetical example and the real-estate market conditions and location can affect the numbers and profitability.
