Military life brings unique challenges and opportunities, especially when it comes to real estate. Frequent relocations, access to VA loans, and varying housing markets provide service members with tools for wealth-building strategies. One powerful investment approach is called the live-in flip, a method that transforms your current home into an investment vehicle. Let’s explore how this strategy aligns with military life and sets service members on a path toward financial growth.
What is the Live-In Flip?
The live-in flip combines living in a home and investing in it at the same time. Here’s how it works: You buy a property—often one that needs some level of renovation—and move into it as your primary residence. While living there, you make improvements over time, focusing on upgrades that increase its value. These improvements might include remodeling the kitchen, painting, updating floors, or enhancing curb appeal. Once the upgrades are complete, or you get a new set of orders, you sell the home for a profit. Essentially, you turn your home into a live-in project that builds wealth.
The live-in flip offers a straightforward way to enter the world of real estate investment without taking on the risks of rental property management or needing a large amount of capital upfront. For military members, frequent relocations and access to VA loans make this strategy even more appealing, as it aligns well with our lifestyle and financial goals.
Why the Live-In Flip?
The live-in flip stands out to me as the ultimate wealth-building tool for military families. This strategy feels perfectly designed for those who relocate frequently, offering an opportunity to build equity and achieve tax-free profits with every move.
- Leverages VA Loan Benefits: These loans allow service members to purchase homes with little or no down payment, no private mortgage insurance (PMI), and competitive interest rates. This makes it easier to buy properties with renovation potential without requiring significant upfront cash, which can instead be put into the improvement projects.
- Aligns PCS Timing with Tax-Free Profit Strategies: Relocations typically occur every two to three years, providing a natural timeline to live in, improve, and sell a property. This strategy also leverages the IRS capital gains tax exemption, which allows homeowners to exclude up to $250,000 in profit ($500,000 for married couples) from taxes if they’ve lived in the home for two of the last five years. For military families, PCS orders and deployments come with additional extensions, adding flexibility and maximizing the opportunity for tax-free profits.
- Consistent Demand and Reduced Risk: Homes near military installations often experience steady demand due to the regular influx of service members and their families. This reliable market helps maintain property values and simplifies the selling process when it’s time to move. Additionally, the live-in flip offers a lower-risk approach compared to managing rental properties, as there’s no need to deal with tenants or long-term property maintenance from afar.
Challenges and Considerations
The live-in flip offers great potential for wealth-building, but it also comes with challenges that military families should carefully consider:
- Balancing Renovations with Military Life: Managing home improvements alongside military responsibilities and family life can feel overwhelming. Efficient project management proves crucial to completing renovations.
- Risk of Unexpected Deployment: A sudden deployment could disrupt renovation plans or force a sale before the home reaches its full market potential. Flexibility, partners, and contingency planning are key to navigating such situations.
- Staying Within Budget: Renovation costs can quickly escalate if not carefully managed. It’s essential to set a realistic budget, prioritize value-adding improvements, and avoid over-improving beyond the neighborhood’s market standards.
- Unpredictable Market Conditions: Real estate markets can fluctuate, affecting property values. Researching the local market before purchasing a home helps mitigate risks and increases the chances of a successful sale.
My Real-Life Example.
In 2016, during my PCS to Beaufort, SC, my wife and I decided to put our BAH toward building equity instead of renting. We purchased a three-bedroom home for $200,000 in an expanding development. While working at Marine Corps Recruit Depot Parris Island, I used my limited free time to improve the house, adding features like an electric fireplace, LVP flooring, a pergola, and landscaping. These upgrades cost under $15,000, with most of the work done over 3 years and on weekends.
By 2019, when we received new orders, we rented the house out to fellow military tenants. Two years later, the tenants moved, and we decided to sell. Thanks to market appreciation and our improvements, the home sold for $300,000, earning us approximately $100,000 in tax-free profit under the IRS primary residence exemption.
This successful live-in flip became the launchpad for our real estate success, providing the capital for our next investment and propelling us into our thriving wealth-building path.
Tips for Success
- Focus on value-adding improvements, such as adding square footage, kitchens, bathrooms, and curb appeal enhancements. Avoid over-improving beyond the neighborhood’s market standards.
- Plan for flexibility. Military life involves change, so prepare for unexpected PCS orders or delays in renovations. Have a “renovation care plan” in the event that you are suddenly deployed or get unexpected orders! Don’t be afraid to set up and negotiate a partnership with a trusted friend, spouse, or family member.
Conclusion
The live-in flip is an incredible wealth-building strategy for military families. With access to VA loans, steady housing demand near bases, and favorable tax advantages, service members can build equity and generate wealth while taking advantage of our mandatory relocations.
Ready to explore the possibilities of a live-in flip? Start by researching properties near your future duty station or connect with me so I can link you up with a knowledgeable Century 21 realtor who understands the unique needs of military families.