Live-In Flips: The Strategy That Could Make You $500K Tax Free

Christian: [0:00] Hello, hello, and welcome to another episode of the Awesome in Seattle podcast. This is your host, Christian Nossum of the Awesome Nossum Group at Wilson Realty Exchange, Inc. And today we are talking about an awesome yet very underutilized strategy in real estate called the live-in flip. That is where you live in the house and you flip it, and then you move after a couple years. Uh, and we have a very special guest, but before I get into that, I'm gonna introduce my amazingly beautiful co-host. Who is this person?

Shannon: [0:27] I am your wife.

Christian: [0:28] Oh, my wife. That's right. Yes. Yes. Shannon Nossum is her name. Uh, and then we have a very special guest, and this is someone that is utilizing this strategy, and this is why we've had him- or have him on. We have helped him buy f- one, two houses? I don't know how many we've helped you buy so far. O- one of many so far, how about that? Uh, and it's Vis- Victor Esquivel, and did I say it right?

Victor: [0:52] You did. Yeah.

Christian: [0:52] Good job. Woo. All right. Um, Victor, thank you for joining us.

Victor: [0:56] No, thank you for having me. I'm, I'm excited.

Christian: [0:58] Yeah. So let's kinda talk about what exactly a live-in flip is. Do you wanna describe it real quick?

Victor: [1:06] Yeah. Yeah, so a live-in flip is a, um, real estate invest strategy ultimately that bridges a gap of a traditional real estate, uh, strategy with advantages of home ownership. Mm-hmm. Right. Yeah. So you're able to, like, finance a property with traditional financing- Mm-hmm homeowner rights, cheaper debt.

Christian: [1:27] Yeah.

Victor: [1:28] And there are tax advantages when you do go out and sell the property, so-

Christian: [1:32] Yeah … Victor: yeah, that's the foundation of it, so. Yeah. So I mean, you could literally buy a property as your primary residence, meaning you're gonna live in it. You could have 5% down payment or more if you wanted. You could even do 3.5 or 3%, or depending on what your deal is, you could even do potentially 0% down. Buy a house, flip it, and then in two years you can sell it and make up to, if you're married, $500,000 tax-free profit. Uh, if you're single, $250,000 tax-free profit on the sale of the property. So yeah, like you said, it's a very amazing process. It's one that a lot of people just don't think they could do, and I think my goal for this episode is to show a lot of people that you actually can do it.

Victor: [2:21] Yeah.

Christian: [2:22] Not nearly as hard as maybe you might think. Um, and the cool thing about being the one that's living in it, you can make some errors and mistakes and still be completely fine. Um, and I'm not saying that 'cause you made any. I'm just saying that, that because you're in it as your personal residence, you don't have some of the same time-

Shannon: [2:44] Yeah, you have a longer

Christian: [2:45] runway … constraints. Yeah, which makes it a lot easier. Yeah. So-

Shannon: [2:49] Yeah, so what are… I know you've done flips before. So I know you're totally capable with that strategy, but why do you like the live-in flip strategy?

Victor: [3:01] I would say it allows me to control the risk a little bit better, right? 'Cause with investing, any type of investing, to be honest, there's always risk associated- Mm-hmm … right? Whether that's stocks, um, you know, crypto, real estate- Mm-hmm … there's always risk.

Shannon: [3:15] Mm-hmm.

Victor: [3:16] But with real estate, and specifically this strategy, it allows you to control it. Of course, you still have to follow fundamentals of buying undervalued assets, but that's just, you know, more, it, it gives more meat on the bone, right? Ultimately so.

Shannon: [3:32] Yeah. Mm-hmm. And I, I'm really, really excited. I think we've talked about this a lot, but this is underutilized, and I think even a lot of real estate investors that I know don't utilize- Mm-hmm this strategy, which we didn't either, um, for a long time. We did for a good- We did for- … 10 years … Speaker: 10 years in a row, and then we had kids and then we stopped. Yeah, we moved for 10 years in a row, and then we stopped, and now we're s- utilizing this strategy again. But even, um, traditional, like, home buyers, you don't have to be a real estate investor to wanna use this strategy. Mm-hmm. So I'm excited to dig into it more. So I know you have a W-2, and- Meaning you have

Christian: [4:05] a

Shannon: [4:05] salary job … you have, yeah, a salary job. Yes. Tell me how that job kind of, how do you work with this, this live-in flip strategy with that job, like balancing your time, but also, how does that help you be able to do this strategy?

Victor: [4:19] Yeah. I would say having a job, um, the biggest advantage to it is that you're financeable.

Christian: [4:25] Mm-hmm.

Victor: [4:25] Right? You're allowed to, like you called out, Christian, to have, um, multiple options for financing, right? Mm-hmm. Whether that's 0%, 3%, 5%, et cetera. Mm-hmm. Right? That's one of the biggest advantages. Um, and as far as, like, balancing that with a real estate project, I think it comes down to, you know, things that are in the process of the real estate transaction itself, right? You know, who you hire, you know, your team- Mm-hmm … what your vision is with the property. Definitely a lot, but that's where, you know, systems come into play, so.

Christian: [5:00] Yeah.

Shannon: [5:00] Yeah. Absolutely. Definitely. Okay, so somebody's thinking about doing one of these live-in flips. Share with them kind of what a buy box might look like for this kind of project. What are, what would they be looking for? What were you looking for? Can you share a bit more detail?

Victor: [5:15] Yeah. For me, um, since I am married, um, you know, I have a beautiful wife who is very supportive about this journey. I also have three children, right? Mm-hmm. So my buy box is gonna look very differently than most people.

Christian: [5:28] Mm-hmm.

Victor: [5:29] Mm-hmm. Right? I am targeting, you know, good neighborhoods, uh, in Seattle specifically.

Shannon: [5:33] Mm-hmm.

Victor: [5:34] Uh, and I am targeting, again, undervalued assets where I can build equity, right, through value add, right? And what I'm trying to build is a 25% equity, uh, position after my all-in costs.

Christian: [5:50] Got it.

Victor: [5:51] Uh, so good neighborhoods, value add, um- Where I can fit my family ultimately- Yeah. Got it Yeah. So-

Christian: [5:59] So to put numbers on that, at the end of the day, if the house is worth a million dollars, you want to only be into it for $750,000.

Victor: [6:07] That is correct, yeah.

Christian: [6:07] Yeah, so easy math right there. Um, and that's… It sounds crazy to people, I think, to say, "You're gonna have $250,000 in equity." It's really not that difficult, especially since you're looking at this over a two-year time span, right?

Victor: [6:22] Yes.

Christian: [6:23] This is not a three-month later, you flip the house, and now you have this. You're also… You got some debt, a loan balance buydown, which isn't much, but you got some of that, plus time, plus the value that you've added to the house over that timeframe. So it is much more doable than I think most people think.

Shannon: [6:42] Mm-hmm.

Christian: [6:42] Um, and clearly it works 'cause you're doing it. Yeah. So, um, so yeah, good job there. How are you finding, um, and funding your, your deals?

Victor: [6:55] Great question. So, so the finding, I think it goes back to a comment that I made earlier, you know, having a good broker on your team- Mm-hmm … um, you know, who knows that buy box that we described earlier, who knows your goals. Um, you know, that can be on-market, uh, off-market transactions. Uh, for my first live-and-flip, it was a on-market transaction. Mm-hmm. Right? So, uh, that's how I'm finding those, uh, by networking, right, with the right people ultimately who know my goals and who want to grow together.

Shannon: [7:23] Yep.

Victor: [7:23] How am I funding? Um, my first one, I funded that through, again, you know, savings that I had. I was already investing in stocks. Uh, so basically I had a small portfolio of stocks where I was just investing into the S&P 500.

Christian: [7:40] Mm-hmm.

Victor: [7:41] Uh, and that grew over time, right? Dollar cost average into this. Um, so I was tapping into those, um, funds. In addition, I had a primary before that.

Christian: [7:50] Mm.

Victor: [7:51] So, uh, you know, something that happened that was great during 2020, 2021 with, um, real estate is, you know, the debt was very cheap.

Christian: [8:01] Yeah. Super

Victor: [8:02] cheap. So I refinanced my, um, house- Mm-hmm … um, into a 15-year, 2%, um, rate.

Christian: [8:10] Wow.

Victor: [8:10] In addition to that, since the equity had been doubled due to the surge in prices- Mm-hmm … I pulled a HELOC on it.

Christian: [8:17] Smart.

Victor: [8:18] So I was able to leverage my previous primary for my next project, right? Mm-hmm. So compounding the equity.

Christian: [8:25] Mm-hmm. Mm. And then did you sell that primary or did you keep it as a rental, or what was your strategy in that regard?

Victor: [8:32] I kept it. Nice. Um, mainly because the debt- Yeah … on it is very cheap.

Christian: [8:39] Yep.

Victor: [8:39] If you look at a amortization schedule, you'll see that the payment on that is mostly principal.

Christian: [8:48] Mm-hmm.

Victor: [8:48] So I think of it like a slowly, like a savings account. Yeah. Again, I'm doing this to build wealth, right? And ultimately, so my kids have something secured for the future, right? Yeah. Whether that's college education, whether they, they wanna start a business. Mm-hmm. 'Cause everything's getting very expensive here. Yeah. Mm-hmm. So I

Christian: [9:04] don't think it's going down anytime soon either. Yeah, that's super smart. Uh, how much capital do you usually bring into your live-in flips?

Victor: [9:16] Great question. Uh, the first one, I did a 5% down- Mm-hmm … on traditional financing. So it was 5% down of the purchase price.

Christian: [9:24] Mm-hmm.

Victor: [9:25] Um, if I recall correctly, it was probably r- around 50,000.

Christian: [9:29] Mm-hmm.

Victor: [9:29] Uh, in addition to that, I needed to fund the rehab, right? Yep. 'Cause that's a big portion, right? Yeah. So it's, again, it's a value add strategy still. And for that one, I probably, um, brought in an extra 200 to 250,000.

Christian: [9:45] Mm-hmm.

Victor: [9:46] So.

Christian: [9:47] And then did you leave all that equity in the house or then did you later get a home equity line of credit or refinance or do anything in that regard to kind of tap into the equity that you built?

Victor: [9:57] Yeah. Yeah, so that's just basically to like multiply my equity, right? Yeah. Um, yeah, so you're absolutely, uh, correct on, on that assumption. Uh, I did refinance the property, right? So after I purchased it, I refinanced at a

Christian: [10:12] higher- After you did the, the, the rehab and-

Victor: [10:15] Exactly … Speaker: increased the value and made the house worth, worth a lot more. Yeah, yeah. Yeah. So then once I had my, my new value, I went to a credit union, a local one- Mm-hmm … and, you know, showed them my appraisal, and they're like, "Yeah, we can give you," I think up to 80% of my loan to value.

Christian: [10:33] Yep.

Victor: [10:34] And again, leaning back on my W-2s again.

Christian: [10:37] Yeah. Right?

Victor: [10:37] Mm-hmm. 'Cause they just still need to, um, get approved for that second loan.

Christian: [10:43] Mm-hmm.

Victor: [10:43] So I was able to tap into that equity, so.

Christian: [10:46] Nice. Very, very smart. Um, what does your live-and-flip buy box look like? 'Cause I know you're looking in Seattle. Um, so how are you kinda looking at houses and how are you evaluating them to see if it makes sense for you?

Shannon: [11:01] And do you need or want to get to that? So part of the thing we haven't really touched on in this- Mm-hmm … is that the r- part of the reason people wanna do this is that capital gains savings. Yes. So when you make this money or sell the house, you are exempt from capital gains if you've lived in the house, too, the last five years. Mm-hmm. And so I've heard some investors, um, say, especially if they're married, they wanna get to that $500,000 mark, or maybe they have another benchmark and they're like, "We'll get there because of appreciation or paying down," whatever. Do you have like a certain number that you're like, "When I do my math, I wanna be at this"?

Victor: [11:39] I don't have a precise number. Um, again, for me, it's at 25% equity position, right? Mm-hmm. Yep. So that will vary by purchase price.

Shannon: [11:48] Mm-hmm.

Christian: [11:48] Mm-hmm.

Victor: [11:49] I'm only financeable up to a specific amount, so there's that gap that I need to, like- Yeah stay under.

Shannon: [11:56] Yeah, same. Um- That's why I asked that.

Victor: [11:58] Yeah, so, but yeah, for me, it's ultimately, you know, like when I look at properties and, and think of them, like- I ask myself is the value there?

Shannon: [12:08] Mm-hmm.

Victor: [12:08] Right? 'Cause that's, that's the foundation. Totally. The value has to be there, so.

Christian: [12:12] Yep. Mm-hmm. Yeah, that makes sense. Um, what do you think, like, how do you see the financial position that someone should realistically be in, um, before they attempt this strategy? Um, like, how much should they have in reserves, meaning cash on hand? And is this… I guess the follow-up is, is this why you're trying to do a smaller down payment to kinda keep those funds in your pocket so you can spend them on doing the rehab work?

Victor: [12:41] Yeah, that's a great question. Um-

Christian: [12:43] I have a lot of them, apparently. I'm, I'm happy about that.

Victor: [12:46] Yeah. Yeah, so I would say to, yeah, y- you wanna b- have a solid foundation financially- Yeah … right? 'Cause, uh, one of the stressful parts about this strategy, just in, in real estate, right? Mm-hmm. There's always things that happen during construction.

Christian: [13:02] 100%, yes.

Victor: [13:03] Right? There are, you know, things that go wrong. There are overages that- Mm … you don't expect.

Christian: [13:07] Mm-hmm.

Victor: [13:07] So your reserves matter a lot, right? Mm-hmm. I remember going through, through my project and having, you know, things happen during the construction project that I did not account for initially during my underwriting- Mm-hmm right? So it's, it's those reserves that give you peace of mind at the end of the day. Mm-hmm. So I'd say, you know, whatever your initial numbers are, make sure you have an additional buffer, right? Yes. Whether that's an extra six months of payments, uh, or an additional 10, 15% contingency on your budget. Yep. So.

Christian: [13:38] Yeah, I agree with that 100%. Yeah. Yeah, 'cause every time you open a wall, there's something new that you weren't expecting behind it- Yeah … it seems like, so yeah.

Shannon: [13:46] Yes. This is why real estate investors are just problem solvers. All day- Yep … new problems.

Christian: [13:51] And the thing is, with real estate, the bigger the problem you can solve, the bigger the profit that you make.

Shannon: [13:56] Mm-hmm.

Christian: [13:56] That's really how it all boils down at the end of the day.

Shannon: [13:59] Mm-hmm. Okay, so I want to talk about your first, 'cause Victor has done one live-in flip where he has bought it, he has done the renovation, he's lived in it two years, and he has sold it, and then he's doing another one. So I wanna go through the first deal, which you've kind of gone through the whole gamut on that one. Mm-hmm. Tell us about the numbers. So what did you buy it for? And, like, lead, lead us into those, um, that process.

Victor: [14:25] Yeah. So I, I bought the property for 850,000. Um, and I put around 280 to maybe $300,000 into renovation.

Shannon: [14:37] Mm-hmm. Mm-hmm.

Victor: [14:38] And I sold it for 1.55 million.

Christian: [14:42] Wow.

Victor: [14:43] Um, so yeah, those are the numbers, right? Yeah, th- profit's great, but I think it's more about the lesson- Mm-hmm right? The skill set that you gain. Uh, and building a repeatable system-

Christian: [14:53] Yeah … Victor: that you're able to keep doing- Mm-hmm … over and over and over again.

Shannon: [14:58] Mm-hmm.

Victor: [14:58] Well, hopefully I don't have to move too many times, but-

Shannon: [15:01] Yeah, yeah. Uh, how long did the remodel take? Um, and you moved in when the romodel- remodel was finished, but where were you living during those renovations?

Victor: [15:11] Yeah, so I was, I was in and out of that property, but kind of set home base at my previous primary. Mm-hmm. Um, as far as the renovation, that took about four months total from start to finish.

Christian: [15:25] Mm-hmm.

Shannon: [15:25] Okay, that's pretty fast.

Christian: [15:26] That's pretty fast, yeah. That's pretty good. And it's also, it sounds somewhat typical for, uh, like cosmetic. You didn't do, like any additional floor, bump out, anything like that on the foundation. You were just redoing the interior, right?

Victor: [15:39] Yeah, for the most part. It, it was a 1947 house- Mm-hmm … uh, that had two previous additions to it.

Christian: [15:46] Oh, wow.

Victor: [15:47] Um, so having to work around that was definitely an interesting challenge.

Christian: [15:51] I'm sure, yeah.

Victor: [15:52] Uh, but yeah, I would say most of the work was probably in the basement, since that required some reconfiguration. So-

Christian: [15:57] Mm-hmm. Mm-hmm. Was it unfinished before, or kinda finished?

Victor: [16:00] It was finished, but not properly.

Christian: [16:05] Interesting.

Shannon: [16:05] Um, one of the things that this process entails, if you wanna take your money out, so you buy the house, you remodel it, you move in, and eventually you sell it, and you get a profit, but in between that, if you wanna get access to, like doing a cash-out refi or something, you might need to get an appraisal. Did you do that, and what did that come back at, and, um, how, how did that, like how long did that process take?

Victor: [16:32] Yes. So again, in order to tap into the equity that you build, I think, you know, untapped equity is just wasted dollars, in my opinion. Totally. I agree. Uh, right? And as real estate investors, our, our job is to keep growing, and capital makes us grow.

Christian: [16:48] Mm-hmm.

Victor: [16:49] So yeah, I… My initial plan was to go in at 5%, right? And once the value was created, either do a cash-out refinance or a HELOC.

Christian: [17:01] Mm-hmm.

Victor: [17:02] Unfortunately, with rates being at over 6%- Yeah … you know, I think we still have around, around the same nowadays-

Shannon: [17:08] Mm … Victor: it made it difficult to qualify for a cash-out refinance.

Christian: [17:11] Yep, yep. So- At that price point now, with that it's worth way more, and you still have the same job, so it's not like you got this huge income boost or anything to make you qualify for a higher-

Victor: [17:21] Yes.

Christian: [17:22] Yeah, yeah.

Victor: [17:22] Yes, exactly. And yeah, so I, I swapped strategies, like, midway through. I, I, I like having multiple options, right? Totally. I think so. Yeah.

Christian: [17:31] And that's why you're so smart.

Victor: [17:33] Thank you. Um, but yeah, so th- that changed, and once I started that process, the refinance was set into place, and then I looked for a HELOC. The value came in at 1.525-

Christian: [17:48] Mm-hmm … Victor: uh, for my refinance. However, my credit, you know, wanted a re-appraisal. They came in at 1.5- Mm

Victor: [17:56] uh, which, I mean, I still get the majority of- Yeah … you know, the initial, uh, equity on there, um, accessible. But yeah, that's, you know, some high-level, like- Mm-hmm … numbers on that, so.

Christian: [18:07] Yeah.

Shannon: [18:08] So it sounds like you got a really good return on this deal. How does that return compare to other strategies that you've evaluated or that you've tried?

Victor: [18:18] So yeah, absolutely great return. Um Again, I, I mentioned briefly that prior to real estate investment, I was doing a lot of, um, stocks- Mm-hmm … investing, right? Dollar co- avera- dollar cost averaging into those.

Shannon: [18:35] Mm-hmm.

Victor: [18:38] The returns are, are better because you create the value. Yeah. I cannot buy the S&P 500 at 5,000-

Christian: [18:44] Yeah

Victor: [18:45] right now. Right, I think it's over 6,000-ish. Um, so there is that value creation, right? Mm-hmm. So, yeah, in my opinion, value add construction, like, definitely outperforms other ones, right? Yep. And the strategy is, is about creating equity, right? For me, I don't care about cash flow at this point because my goal is wealth creation.

Christian: [19:09] Mm-hmm.

Victor: [19:10] Right? I can later trade this equity for cash flow, right? Totally. So when I compare it even with other paths within, like real estate, such as buy and hold-

Christian: [19:18] Mm-hmm … Victor: you know, turnkey rentals that use target cash flow, um, I can easily outperform the 10% cash on cash returns at a typical buy and hold turnkey, um, investor might have on their portfolio, so. Yeah. Makes total sense. And this is why it's so important for you as the listener to understand what your goal is. Like, it's pretty tough to have value add and get cash flow, uh, as a long-term rental in the same deal.

Shannon: [19:54] Mm-hmm.

Christian: [19:54] Like, you're, you're getting one or the other. That's generally how it works. You're either flipping a house or you're- and then selling it and getting the cash out of that, or you're buying a rental that somehow is cash flowing for you. Um, generally, you don't get both. But in this regard, with a live-in flip, you're kind of getting two things, they're just not the same two. You gotta live somewhere, so you might as well come in with a lower down payment, use the rest of your cash that you have saved up, or get a loan a different way to remodel, increase the value of the home, make it more livable, and then tap into that while you're even living there like you did. Um, tap into that with a home equity line of credit or a refinance, pull that cash back, back out, and now you can redeploy that into another project or save it for the next one that you're gonna do. Like, there's lots of different ways to do it. Um, getting back on track with your journey, um, do you usually, when you're doing a live-in flip, when you buy the property, are you remodeling it first before you move in, or are you moving in and trying to do jobs a little bit as you can? Like, how, how… What's your strategy in that regard?

Victor: [21:07] Yeah, so typically since I buy houses that need a lot of work-

Christian: [21:10] Mm-hmm … Victor: I cannot move into those before. Um- Especially with three little kids.

Victor: [21:15] Yeah. Although I would say, you know, on a recent walkthrough, I took my little ones, and they're like, "Oh, we should probably move to this house as is." Uh, and I was like, "We should, huh?" But, you know, plumbing wasn't working- Yeah … which they don't understand yet. Yeah, no. So-

Shannon: [21:30] You're like, "There's no toilets, guys."

Victor: [21:32] Yeah.

Shannon: [21:32] Yeah.

Christian: [21:33] Those are gonna be necessary.

Victor: [21:34] Yeah.

Christian: [21:36] That's funny. Um, do you design differently when you are planning to live in it versus if you're gonna just flip it?

Victor: [21:45] No, not for me personally. Um, again, I, I focus on the fundamentals.

Christian: [21:51] Mm-hmm.

Victor: [21:52] And one of my great mentors says, um, "Kitchens and primaries," uh, "sell houses."

Christian: [21:59] Mm-hmm.

Victor: [21:59] So that has stuck with me, and I apply that principle, right? And- I go with what will be sellable-

Christian: [22:09] Yeah … Victor: ultimately, so.

Shannon: [22:10] Mm-hmm.

Christian: [22:11] And also, I'll add in this, because I've seen some of your projects, um, you're smart in that, you know, design trends, you're only living in the house for usually two years-ish, a year to two years, and in that timeframe, the design trends don't necessarily change that drastically, that quickly. So as long as you're not on the tail end of a design trend, you're more on the leading end, um, you're gonna be fine.

Victor: [22:37] Yeah.

Christian: [22:37] So I think, or maybe you do something more classic that's kinda always in style, versus trying to be a little more trendy when- Yeah … you're doing a live-and-flip. I think that's a good way to approach it. Um, I guess you kinda just answered this, but I was just, I'm gonna ask it anyway. What upgrades matter most in your opinion on a house?

Victor: [22:55] Yeah, so I think in addition to the kitchen and, and the primary, I would say I focus a lot on, on the flow of the house.

Christian: [23:05] Mm-hmm.

Victor: [23:05] Right? Um, in Seattle, we have a lot of basements, so you always want that indoor, outdoor feel. And yeah, you know, you, you design the house, you know, you wanna make it feel natural, right? Yeah. Especially, you know, trying to fill, uh, fix these old houses. You know, you, you wanna do your best to accomplish that. So design for flow as well.

Christian: [23:26] Yeah.

Victor: [23:27] Cool.

Shannon: [23:28] Let's talk about your new project. So not only have you done this once, but you're going to do it again. Mm-hmm. So talk about your new project that you just purchased, and what, what are the details of that deal?

Victor: [23:41] Yeah. So I, I purchased, uh, a new project recently, you're right. Um, this one is in Northwest Seattle.

Christian: [23:49] Okay.

Victor: [23:49] Um, neighborhood of Ballard. Uh, high level-

Christian: [23:53] I've heard of that. I've heard of that neighborhood. Have you? Yeah.

Victor: [23:55] Yeah, it's, it's a nice one. Um, high level numbers for that one are, like, the purchase for 870, will probably be close to the 300 mark in renovations for that one. Mm-hmm. It's a 1905 house.

Christian: [24:10] Mm-hmm.

Victor: [24:11] Um, so that one requires a lot of work.

Christian: [24:13] Yeah. Um- How

Shannon: [24:14] many square feet is it?

Victor: [24:15] Is 2,200-

Shannon: [24:18] Okay … if

Victor: [24:19] I remember correctly. Mm-hmm. Yeah. So-

Christian: [24:20] So my guess is 1905, it's gonna need basically all new systems. Mm-hmm. Plumbing, electrical, furnace, all the stuff.

Victor: [24:28] Yeah. Roof. Yeah. So- Windows. Exactly, yeah. Everything,

Christian: [24:32] basically.

Victor: [24:33] I call this full guts. Um- Yeah … and yeah, it's, it's definitely needs a lot of work, and as you called out. Yeah. Sure. Those are, you know, on my list to update, so.

Christian: [24:44] Yep.

Shannon: [24:46] Uh, so for this particular property, like, what is your renovation scope, and what, what things are you trying to fix in the house? We just talked about systems, but are there flow issues? How does it fit your family, and is that a consideration when you're doing these? So what is, what is this house gonna be like when it's done?

Victor: [25:02] Yeah, so this one, uh, is a long, skinny house. Uh- Mm-hmm … 1905 Craftsman houses, uh, are, a lot of them are like that.

Christian: [25:13] Yeah.

Victor: [25:13] I've come to find out. It's true. Right? So yes, fixing the flow is definitely a, a problem that I needed to solve. Mm-hmm. Uh, and one of the ways that I like doing that is, you know, figuring out what the current floor plan looks like, and finding the skills that I don't have outside of my expertise. So- Mm-hmm uh, something that I've been doing a lot of recently is hiring out VAs-

Christian: [25:42] Mm-hmm … Victor: to help me with that. So a virtual assistant, yep.

Victor: [25:45] Yeah. And, and visualize, you know, like, my ideas, my plans, and help with that.

Christian: [25:51] Mm-hmm.

Victor: [25:51] Um, and that has paid tremendous dividends. Um, but yeah, so that's one of the biggest issues. Also, downstairs is a little funky. Again- Mm-hmm … I, I plan to update it in a way that it gives me that indoor/outdoor feel- Mm-hmm … 'cause this house also has a basement.

Christian: [26:07] Yeah.

Victor: [26:07] Um, so yeah, you know, flow, and then as far as, like, livability, um, due to kinda like space constrain- constraints- Most of our bedrooms will be downstairs. Primary will be upstairs with an office.

Christian: [26:22] Mm-hmm.

Victor: [26:23] Uh, so that will be a, a fun, uh, conversation with my wife. "Tell us about this one straight," right? So that, that probably means, hey, kids will be downstairs.

Christian: [26:31] Yeah.

Victor: [26:32] And, well, we will be upstairs, so.

Christian: [26:34] Yep.

Shannon: [26:34] Mm-hmm.

Christian: [26:34] But having an office upstairs means if you did have a really little one, they could theoretically be in the office early on, those first few years, right?

Victor: [26:43] Yeah. I call it office, but I think it's gonna be a playroom ultimately, so Yeah,

Christian: [26:47] yeah.

Shannon: [26:48] Yeah. So what is your projected after-repair value for this, and are you thinking about staying the whole two years? Is that kind of the plan?

Victor: [26:57] Projector ARV will be around the one five mark.

Shannon: [27:01] Mm-hmm.

Victor: [27:02] Um, so similar numbers to my previous deal, and yes, I, I wanna stay there for the two years.

Shannon: [27:09] Mm-hmm.

Victor: [27:10] Because going back to why I'm doing this strategy, in addition to the value add, um, goal for it, right, creating the equity, I pay a lot to lean taxes as a W2 earner. Mm-hmm. Um- Yeah … so that helps me minimize some of the impact on-

Shannon: [27:27] Mm-hmm … Victor: on the, um, capital gain, so.

Christian: [27:32] Yeah.

Shannon: [27:33] So you've done this process before and you're doing it again. Is there any lessons that you learned that you would do differently this time?

Victor: [27:38] Yes. So I, I'm taking everything that I tried on my previous project, right? There were definitely, like, minor, like, flow issues that I had to, like, fix, right, like on my previous project. I'm taking in that same mindset.

Christian: [27:56] Mm.

Victor: [27:56] I w- I wanna say the biggest lesson that I'm bringing forward from my previous project is the decision fatigue-

Christian: [28:06] Mm-hmm

Victor: [28:07] right, that, that I learned happens on big projects, right? Yeah. Mm-hmm. And balancing that with a W2-

Christian: [28:15] Mm-hmm … Victor: um, is, you know, something that, that I'm changing, right? So- Yeah … Victor: I'm coming in with a design package from day one, right? Floor plan, materials, everything set up for, uh, up front so that I don't have to make the decisions later on, right? So it's- Yeah. Smart.

Victor: [28:34] Yeah. Do the work up front.

Christian: [28:35] Yeah. We're at, uh- Can- Yeah.

Shannon: [28:37] We're at- I feel like we could do a whole podcast about decision fatigue. I feel like-

Christian: [28:40] We're, like, 99% of the way done with our live-in flip, and the decision fatigue is- I'm like, "Have you ordered the

Shannon: [28:46] lights yet?" Christian is driving me He is so annoyed at me right now. We … There's literally two light fixtures that didn't really work, and so he's like, "You need to reorder these," and I'm like, "I just can't. I can't."

Christian: [28:56] Just pick something.

Shannon: [28:57] I've picked 1,000 things, and now I'm done. I have no, I have nothing left. And I'm like, "You pick them. You pick them. I'm done."

Victor: [29:04] Yeah. The worst is when you change your mind

Shannon: [29:07] after you- That's what it is. That's what's happening. I've already picked them.

Christian: [29:08] We installed something, she didn't like it- No, it didn't work … now she

Shannon: [29:11] has to pick something. It's not that I didn't- Well- It's not that I didn't like it. Well- It didn't work

Christian: [29:15] properly. One you didn't like, one that didn't work very well.

Shannon: [29:17] Anyways. Christian has some work to do- … and choose some light fixture. Maybe Victor can help you. Although you have too many decisions to yourself. I know, exactly. Never mind. The kids can

Christian: [29:28] pick it. Ugh. All right. So let's talk, um, about family. How do they feel about moving all the time? Do they like it? Is it exciting? Is it annoying? Do they d- mind switching schools? Like, where are you at with that?

Victor: [29:43] Yeah, this one hits home, right? 'Cause, uh-

Christian: [29:45] Yeah … Victor: it, it reminds me of, of the why, right? Mm-hmm.

Victor: [29:49] Yes, you know, building equity as well is, is cool, right? Sets you up financially. Um, but the why has always been to get my time back.

Christian: [29:57] Yeah. Mm-hmm.

Victor: [29:58] Right? So it's- It's, it's hard, right? Yeah. Like, moving your kids. Yeah. It feels chaotic-

Christian: [30:04] Mm-hmm … Victor: in the moment. Um, but we keep going back to the why, and they see me and my wife building something great together- Mm-hmm … right? Being patient, thinking about goals. Wait, you're

Victor: [30:16] patient throughout this? I try my best. Um-

Shannon: [30:21] Sorry, I cannot. He's like, "Wait, this is possible?" Wait, you can

Christian: [30:25] be that way? No

Victor: [30:26] way. Yeah. Yeah, so it's, it's about those lessons, right? Yeah. And yes, houses might be temporary, right? Mm-hmm. I don't think everything's meant to be forever. Um, but the lessons at each house that they live in, um, they get to carry on, right? So- Mm-hmm … they build new friendships, you know. Mm-hmm. Their- kids are very resilient-

Christian: [30:48] They

Victor: [30:49] really are … you found, right? Yeah. Like, they adapt, I feel like, better than adults at times. Oh, I

Christian: [30:53] totally agree. Yeah. Yeah. As you get older, you get more stuck in your ways, and kids, they're flexible, malleable. They're willing to do whatever. Yeah.

Victor: [31:00] Yeah. So I'd say, yeah, from, from the kids' side, you know, they're, they're fantastic. You know, they, as I like to call it, they roll with the punches.

Christian: [31:07] Yeah.

Victor: [31:08] Uh, and my wife has been, like, absolutely supportive about this move, right? Okay. It's

Christian: [31:12] nice that you got an awesome wife.

Victor: [31:13] Yeah. Thank you. I

Christian: [31:14] do, too.

Shannon: [31:15] Yeah, your kids are so sweet, too. Like, I- They really

Christian: [31:18] are … Shannon: I can vouch for, having spent time with them, that- Mm-hmm … they're, you know, that they'd be all in on, on whatever makes sense for the family- Yeah … 'cause they're such, such cooperative kiddos. Yeah. Um, one thing I was gonna say- Yeah … that we were talking to another investor who's used this strategy a lot of times. They also have three little kids. I don't know, it's just maybe a trend. If you have three kids- … you have to do this strategy.

Victor: [31:37] There you go. Mm-hmm.

Shannon: [31:38] And so, uh, we were talking to them, and one of the biggest reasons I think people don't do this strategy is what you're saying right now. It's like, the moving, the ca- little bit of chaos while you're transitioning. Maybe the kids don't wanna move, whatever. And so they said, um, the way they think about it is, okay, so if I paid somebody to come pack my stuff, move it, organize it for me in my new place, like, how much would that really cost? Let's- Well,

Christian: [32:03] they said this. They said what you just said. How much would I pay someone every year for the next 10 years to pack my, pack up all my stuff and move me into a new house, or five times over the next 10 years? And if, if I gave them a million dollars, would they be willing to move every two years for the next 10 years just to get paid a million dollars? And I think most people would say yeah, and that's basically what you're doing.

Shannon: [32:33] Mm-hmm.

Christian: [32:33] You wanna make 250 grand-ish per deal, and you're willing to do it. How many more times are you willing to do this? Do you know yet?

Victor: [32:44] I don't. Um- No, we haven't set a cap.

Christian: [32:49] So you're just gonna roll with the punches like you should be doing.

Victor: [32:51] Yeah.

Christian: [32:51] Yeah.

Victor: [32:52] Mm-hmm. Yeah, so.

Christian: [32:53] So if you did it for 10 years in total, at the end of 10 years, you'd have at least 250 grand, probably much m- or at least a million dollars, if not a lot more-

Shannon: [33:03] Mm-hmm

Christian: [33:04] just by doing this one strategy. So it's a lot about the mindset that you have coming into it. Um, a lot of people just, I don't know what it is, but they're just not seeing it that way. So I think that could be a helpful mindship, mindset shift. There you go. That's what I'm trying to say. Um, mindset shift for you if, um, if you think, "There's no way I could do this," or, "Maybe I'll do this." If you think of it like that, it might actually work- Mm-hmm … because you're gonna pay movers, and if you really think it's a struggle, pay someone to actually pack up your stuff and unpack it in the new house. Like, go all out. Make it as stress-free as possible. Um, there are household organizers that will do this for you, where they unpack, the house is completely organized when they unpack, and you're looking, like you walk into the house and you're like, "Wow, the house, I just have to live here now. I don't have to do anything." Mm-hmm.

Victor: [33:55] I didn't know about that.

Christian: [33:56] Oh, yeah. Yeah. Yeah. It costs obviously more, but at the end of the day, it makes your life so much easier.

Shannon: [34:02] Yeah. Yeah. And I think the discomfort of having to move makes people not wanna do this, but you're right in saying that if I said, "I'll give you a million dollars if you'll move five times" and- Over

Christian: [34:11] the next 10 years

Shannon: [34:12] um, everyone would say yes. Yeah. Everyone would be like, "Yeah, that discomfort's worth it." Mm-hmm. So I think it's, like you're saying, a mindset shift, and clearly Victor's talked enough to his family about that goal and got them on board to understand that it's worthwhile to, to go through the process. And I mean, we're probably gonna do it too. Like, we've been talking to our kids about it. Mm-hmm. And I think it's just a shift in your mindset that a little bit of discomfort is really worth the end goal.

Christian: [34:36] Yeah. What do you think the biggest mistake people make when they're a- analyzing a live and flip is?

Victor: [34:43] Not underwriting appropriately, right?

Christian: [34:46] Mm-hmm.

Victor: [34:47] Like, you have to, like, know construction costs.

Christian: [34:50] Mm-hmm.

Victor: [34:50] Or know somebody that knows construction costs- Yeah … to walk through that.

Christian: [34:53] I mean, if you don't know it, you just have contractors come out and give you bids and ask them to make a line item list, which is not always, they're not always willing to do, but ask them to.

Victor: [35:02] Yeah.

Christian: [35:02] And that will help you get a general idea on that. That's just a quick tip.

Victor: [35:06] Yeah. So I would say, yeah, construction costs is, 'cause that will protect you, right- Mm-hmm … from, from your margin, right? And, you know, you're doing this for equity, right? You don't, you wanna protect that as much as possible. Yeah. So not knowing their numbers enough, construction, same with, like, ARV. Mm-hmm. Not knowing those, uh, after repair value, um, you know, like they could- That's one mistake that I see, uh, being repeated often, so.

Christian: [35:36] Yeah. Yeah. So if that is you, if you don't know this info and you're like, "Well, that's what's stopping me," there are ways to get over that. You can learn. You can ask people that have already been there and done that. You can ask contractors, like I said, to come out and bid out your project and give you a line item breakdown. You can join mentorship programs that you can pay for that give you calculators that do this. You can ask ChatGPT. You can do all sorts of things. There is a way to learn what you don't know yet to stop you from having excuses. So just throwing that out there. You can do this. The information is out there. You just gotta be- Or ask us. I

Shannon: [36:14] mean, we can-

Christian: [36:15] That's what I was gonna say next, yeah … point you in the right

Shannon: [36:17] direction.

Christian: [36:17] Exactly. Um, we help our clients do this, so if that is you, lean on us. Lean on your team. And that's really what it all boils down to at the end of the day. You have to have a good team that you can lean on, which you have done. Um, and that's what you should do. Lean on your team. You're not gonna know everything. Lean on the team to help you fill in the gaps of knowledge that you have. Um, if you were to ask or tell someone that is looking at doing this sometime in the next year, what do you think they need to focus on?

Victor: [36:52] Financial, um, certainty, right? You wanna come into a project and knowing that, one, you can do your down payment, and two, that you have enough money for the rehab, uh, and three, that you have those reserves like we talked about earlier, 'cause that will relieve a lot of pressure, right? Mm-hmm. And yeah, I would say focus on being financeable.

Christian: [37:15] Yep.

Victor: [37:16] And then everything else will fall into place, right? Finding the right team, looking for the right house. Mm-hmm. Mm-hmm. But if you're not financeable, you know, like-

Christian: [37:22] Yeah … Victor: that's sort of a stepping stone that- Yeah … it's a must-use, so. Yeah. Totally. And if, if you need recommendations on who to talk to to understand how financeable you are or not, uh, lean on us. Again, we can refer you to people, um, that do this all day, every day, and that can help you figure out what you actually are able to afford.

Shannon: [37:42] One thing I wanna mention before we wrap up is this strategy can also be used in conjunction with other strategies.

Christian: [37:48] Mm-hmm.

Shannon: [37:49] So you can do this and h- build a DADU in the back. You can buy a duplex and live in part of it and fix it up, and then, and then sell it and… or keep it lat- Like, there's lots of- Mm-hmm … different strategy combinations that you can do with house hacking while you're doing it, and- Yeah … vice versa. So I just wanted to point out that, yes, this is a strategy that's amazing, but it also pairs well with other strategies.

Christian: [38:10] Mm-hmm. Or build a DADU in the back, like

Victor: [38:13] we're doing.

Shannon: [38:13] Yeah.

Christian: [38:13] Like, there's so many different ways to do it. Um, it's not just a very black and white. There's a lot of gray area, but that means there's a lot of opportunity as well.

Victor: [38:22] Yes.

Christian: [38:23] Any last, uh, tips that you would give anyone, um, that is considering doing this?

Victor: [38:30] Yes, I would say the people, the difference between the people who are just passively looking at this and the ones actually doing it is the action, right? So- What it

Christian: [38:39] always boils down to.

Victor: [38:40] Yeah. Yeah. I would say take the action. There is gonna be things you don't know. Mm-hmm. Right? And there's always discomfort in change.

Christian: [38:50] Mm-hmm.

Victor: [38:51] Embrace it. You know, go for it. Um, but have a plan and have the right team, right? So.

Christian: [38:56] I think that's brilliant advice. Yeah. Very, very well thought out and said, and I think you're 100% right. Like, you are never going to know everything before you start taking action in real estate. Never. I don't know everything, and I've been doing this for over 20-plus years. Like, you can't know everything, so stop trying to tell yourself that you need to learn everything before you take a step. Just take the next step, and then take the next step, and then take the next step. It's just keep moving forward. That's the biggest piece of advice I think, um, you could ever really give anyone that hasn't done this. Even people that have done it and that are scared to do it again-

Victor: [39:33] Yeah … Speaker: like, it's the same piece of advice. Um, you just gotta keep taking action. Um, and that's, that's the key to success in life in general. Um, the ones that actually take action are the ones that are successful. So thank you so much for sharing all of your time, expertise, knowledge, um- It's, I hope this sheds some light on how this is totally possible for anyone. Like, you have a real job. You are not a full-time real estate investor. That's right. Um, you are more of a part-time real estate investor. Um, and you can have a regular old job and do this on the side.

Shannon: [40:13] And a family.

Christian: [40:13] And a family, um, and s- still be very successful. So, um, if that's you, and, uh, you are like, "I don't know. I don't know if I have the time," you need to make the time if that's really what you want. If the goal is big enough, and it's a big enough why as to why you're doing it, you figure it out. So, um, I think that's it. Any last tips from you, Shannon?

Shannon: [40:38] No. I'm excited to do this every two years.

Christian: [40:41] I know. I am too at this point. That's our plan. Yeah. We're gonna keep going, uh, on our end. Uh, Victor is gonna keep going on his end. Yes. Um, it's just such a lower risk way to build a ton of wealth tax-free. Like, it just makes so much sense. Um, and at the end of the day, you get to live in a really nice house for two years.

Shannon: [41:01] Yeah, that's the best part. We didn't even talk about that.

Christian: [41:03] Yeah, you get to live in a really nice house. Like, for us, we didn't talk about ours at all, but, like, I got to add some extra personal things. I was willing to spend a little bit more on making, choosing things that I actually wanted for myself to enjoy. It might not have been the biggest return on, on the investment that I'm making- Yeah but I'm gonna get some joy, enjoyment out of it for the next two years. So- Yeah,

Shannon: [41:26] not super expensive stuff, but

Christian: [41:27] just- They're not super expensive things, but they're little things here and there that I'm like, "Ah, I've always wanted this, and I think that-" Mm … "would make, bring me a lot of joy," so we added that. Um, and that's the beauty of doing this. You can do that if you want to. Um, yeah, living in a nice house doesn't suck.

Victor: [41:41] It doesn't.

Christian: [41:43] And after we do this, you know, five times over the next 10 years, we're gonna live in a really nice house.

Victor: [41:49] Yeah. Yeah.

Christian: [41:50] Or be financially free or whatever your goal is. Like, it's, it's pretty cool. It's a fun journey to go on.

Victor: [41:55] Yeah, it's a fun one for sure.

Christian: [41:57] Yeah. All right. So thank you, Victor, for all of your knowledge and sharing. Thank you, Shannon, for yours as well. Um, that's it for this episode of the Awesome in Seattle Podcast. We'll see you next time. See ya.