What is the Live in and Flip Investing Strategy?
I know the beginning of Real Estate Investing is often the hardest part. Most people are overwhelmed by all the information out there, and are unsure about the exact first steps that they need to take.
That’s why I'm excited to share with you my series of beginner Investing Strategies. Over the next few weeks, I’ll be explaining to you some of the most popular beginner strategies for people just first starting out.
The ‘Live in and Flip’ Investing Strategy
This beginner investing strategy is a lot like the title. With this one, you purchase a property as a primary residence that needs some work. You live in it during the renovations and then sell it, usually after a period of about two years, and then roll your money into another property, or two.
The whole point is that you're going to live in the property, force appreciation, build up equity, and then be able to turn around and sell it to reap the benefit.
Why use the ‘Live in and Flip’ ?
The major advantage of this strategy is that because you're using it as a primary residence, you can take advantage of putting less money down, because it's your principle residence.
As your Primary residence, you can avoid paying taxes up to a certain amount on the capital gains taxes to the CRA, or the IRS depending on which country you live in.
Now, disclaimer here, I'm not an accountant or a lawyer. Definitely check with your local team of professionals before you enter any real estate investing strategy to know exactly what the laws are and how they will impact you.
If your team gives you the all clear for this particular strategy, then know this is a huge tax benefit to be able to keep all of the capital gains up to a certain amount tax free.
Points to Consider with the ‘Live in and Flip’ Strategy
Every real estate investment strategy comes with it’s own sets of advantages and with its own set of cons, and this one is no different.
One of the things to keep in mind with this strategy is that you will be living in a construction zone in your day to day life.
I've personally lived in a construction zone through a reno, and it's not really that fun. It's can be really dusty and dirty and everything is shut away in boxes. I'm sure you can imagine the challenges that could go along with that.
Just like with any strategy, make sure you go into it with your eyes wide open, knowing what you're committing yourself to and the challenges that you're going to have to face along the way.
The other consideration with this strategy is that you have to wait a certain period of time in order to see the rewards of your effort. For some people, waiting that 2-4 year period (or however long you decide on) could be frustrating.
We all know that time is going to go by so quickly anyway, so if this strategy is going to get your foot in the door on real estate investing, then I say go for it.
Despite the potential cons, with ‘Live in and Flip’ you're killing two birds with one stone. You're solving your housing situation, which is a huge chunk of anybody's personal finance expenditures. And you're actively building equity while you live there through any of the renovations and repairs that you incur.
As with anything, make sure you look at all the advantages and potential cons of this investment strategy. I always recommend going into something with your eyes wide open on exactly what the pros & cons are going to be, and ensuring it is something that you can commit to, and want to put your time into.
I think the ‘Live in and Flip’ is an awesome way to be able to get started and really use your sweat equity to grow your net worth.
Being able to use the tax advantages of having a principal residence when you sell it, and being able to take that money and roll it into further property investments, is a way to get started in building your real estate portfolio and working towards your financial freedom.
What’s your favourite Beginner Investment Strategy? Share in the comments below, I’d love to hear what’s going to work for you!
