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If you have ever lived in your home while renovations were going on, you know what it is like to live in a construction zone. It is loud, messy and can be very disorganized, but can it also be a strong option for investors looking to flip a property?
Now living in a residential property flip is certainly not the most glamourous option for investors but, it does come with a variety of unique benefits that can make it a strong consideration for those looking to save money while working on their investments.
So, in order to help you determine whether live-in flips is right for you, here are some of the pros and cons that you need to consider.
First – Financing Live-In Flips
Live-in flips are an excellent option for investors who do not mind the mess and are looking to take advantage of some great financing options for their live-in flips. After all, live-in flips are technically still the primary residence of the investor who is buying them. That means live-in flips can often get the advantages reserved for homebuyers such as 5% down payments and lower interest rates.
However, to ensure your flip is set up properly to ensure lasting success, you need to discuss the details with a mortgage agent before starting any live-in flips. So, if you would like to get started today, let us help you by offering you a free strategy call at the link below.
Pro – Tax Benefits of Live-In Flips
By choosing to live in a property that you are flipping, that property has the ability to gain all of the tax benefits that would apply to your principal residence. This means any tax incentives meant to go towards homeowners may potentially be applied to your flip.
In some cases, depending on how long you stay in the flip you may also be able to take advantage of different tax breaks afforded to home sellers, cutting down the amount of tax you will be liable for on the sale amount and allowing you to enjoy more of the profit.
Con – Your Home is Always Messy
Due to projects constantly stopping and starting, live-in flips mean that you will almost always have a messy house. This means that you may decide to hold off on bringing any family and friends over due to the state of the house. That also means that you will have to live with rooms being left in deconstructed states as they are worked on, effectively cutting you out of certain areas of the home during downtime.
Pro – No Rush to Complete Live-In Flips
One of the biggest obstacles that flippers need to face is time. After all, normally when you are flipping a property, you need to budget for how long the work will take to complete so you can continue to pay the mortgage, property tax, insurance, and other expenses for the property until you are able to sell, while you are also paying those same expenses on your home as well. This puts a clock on the flip before you can no longer afford to continue working on the property.
By living in the flip, this problem goes away. Now instead of fronting the bill for two properties worth of regular expenses, you are only paying for one. This essentially removes the need to rush a flip and allows you more time to get the work done and wait for the market to reach an ideal selling point for you.
Con – Less Work-Life Balance
Living in a property that you are actively flipping can potentially become detrimental to your work-life balance. At any given moment of the day, if you are at home enjoying some hard-earned down time, you may find yourself feeling like you are wasting time and could be working on the property instead. Or, because the majority of your leisure is happening inside of your flip, it could become difficult to stay motivated to work. After all, why would you want to build a countertop on a Friday afternoon when your TV is just upstairs. This struggle is part of the reason a lot of families choose to stay somewhere else during home renovations.
Pro – More Mortgage Options
While there are some lenders who do not want to lend against properties that are being flipped, many of them have no issue lending against someone’s home. This means that by living in a property that you are flipping, you are capable of qualifying for different mortgage products across different lenders. This can make it possible to qualify for lower interest rates and better monthly payments than you otherwise would have received.
Discover How To Flip A House With This Step By Step Guide
Con – Some Lenders Will Require You to Stay
Despite the live-in flip giving you access to more options in regard to mortgage products, some of these products come with restrictions. Notably, there are lenders who require that in order for them to lend against a house, you need to live in it for a minimum amount of time – typically 1-2 years. This will not be a problem for everyone, but for investors looking to flip a property faster, they may still be better off living elsewhere.
Pro – You Can Save Money if You DIY
Another great benefit of a live-in flip is the ability to do a lot of the work yourself, at your own pace. As long as you know how to do certain tasks properly, you can save a ton of money by choosing to DIY instead of paying contractors to come in to complete those jobs. However, you should only do this if you know what you are doing and are confident you will turn out the best product.
Con – This Strategy Does Not Scale
Finally, one of the biggest disadvantages of living in a property that you are flipping is that this strategy simply does not scale. After all, while some people do own multiple homes, for tax purposes and government incentives, you can only have one primary residence. That means that if you want to flip multiple properties, you cannot use this strategy in order to get a leg up on any of your additional properties.
While you can always move out of one flip and into another, but that means you have to live in, yet another construction zone and most investors are not going to want to use this strategy long-term.
For More Information
For more information about financing live-in flips, or other real estate investments, give us a call at LendCity. Our agents are here and ready to help you find the answers you need for all of your property needs. So, if you are ready to get started, visit us online at LendCity.ca or give us a call at 519-960-0370. Alternatively, you can click the link below to book your free strategy call today.