Dear Ney Ney,
There are two great ways to improve your possible return from purchasing a home that you plan to live in. The first way is often called a “live-in flips” and the second way is often called “house-hacking.” Either, or even both, might make sense for you depending on your preferences and your family situation.
A “live-In flip” means to buy and live in a house that needs to be updated, or renovated, and slowly do the work while you live in the house. Most people want to buy a house that is ready to be moved into, such as one with a new kitchen, new bathrooms, and nice hardwood floors. Renovating a home, or improving it, can be difficult. Moving homes, especially with a family, can be hard for people and they don’t want the extra work of a construction project.
Homes that don’t have have new kitchens or bathrooms are cheaper than houses with new ones. Besides updates kitchens and bathrooms, you might be able to add an additional bathroom, finish a basement into an extra bedroom or game room, or build a nice backyard patio. More bathrooms and bedrooms make a house more valuable.
When you live in a house you can desabe up over time to do the projects. You also can buy a house with less money down and get a lower interest rate on your mortgage because it is your house instead of an investment property. Finally, if you live in the house for at least two years before you sell it then you won’t pay any taxes on much, if not all, of the money you will make.
There are reasons not to do a live-in flip, too.
It is a lot of work. The reason the houses that need remodeling are less expensive is because it is often hard to manage construction workers. Reliable contractors are expensive. Less reliable contractors might be cheaper, but your projects will be delayed much longer than you might expect them to be.
You don’t need all the money for the repairs at one time, but you want to know you will have the money to do all of the repairs within about 2 years. If you remodel a bathroom and wait 3 years to remodel a kitchen and then wait 4 years to remodel another bathroom they house will not be as attractive to buyers when you go to sell it. Buyers might think the first bathroom needs to be updated again because the older work will look much older compared to the newer updates.
It can be disruptive. Depending on the repairs you might not have a kitchen or a bathroom for a week or two. You might need to sleep at a hotel, eat at restaurants, or take a shower at a gym. It is a small price to pay for the money it will make you, but if you have a family it could be hard.
I think live in flips are a great tool. Many people have made small fortunes by buying a house, living in it for a year and updating it, and either selling it to buy another project or renting it to a tenant and buying another project. After several years of doing this you could have several rental properties and a nice house for yourself.
“House hacking” is a new term for an old idea. House hacking means buying a house to live in, but renting out the extra rooms to other people. In many cases you might be able to live for free, with rent from the roommates paying for your mortgage, real estate taxes, and even utilities.
Many people live with roommates in rented houses but do not want roommates in a house that they own. It is popular to want to live alone because it can take work to get along and live with other people. When people buy a house it is normal for them to want to live it in without roommates and make it feel special.
One consideration when buying a house that you want to use to hock is the number of bedrooms and bathrooms. If the house has a basement or a dining room that can be turned into a bedroom then you can have more roommates and make more money.
There isn’t much more to talk about when it comes to house hacking. Just like live in flips, after a while you might decide to buy another house. You can move into the new house and just replace yourself in the old house with a roommate. As long as you are okay living with other people you can house hack. Some married couples even house hack before they start a family.
The big question is if living with roommates is something you are willing to do. Sometimes it can be fun, sometimes it can be hard work to get along. Only you will know if it is right for you, but it is a good option to consider if you want to buy a house but still keep your expenses low.
I hope that learning about live in flips and house hacking helps you when it is time for you to buy your first house.
I love you,