Why Live-In-Flips May Be the Best Way to Invest in Real Estate with Carl and Mindy Jensen

In this episode of The Personal Finance Podcast, we’re going to talk to Carl and Mindy Jensen about the Live-In Flips.

 

Join Our Newsletter here!

 

Learn to Invest with Index Fund Pro! Our complete step-by-step guide to investing! https://mastermoney.co/index-fund-pro/

 

Thanks to Our Amazing Sponsors!:

• Chime: Start your credit journey with Chime. Sign-up takes only two minutes and doesn’t affect your credit score. Get started at chime.com/pfp.
• Thanks to Ka’Chava For Sponsoring the show! Go to kachava.com/pfp and get 10% off on your first order.
• Shopify: Shopify makes it so easy to sell. Sign up for a one-dollar-per-month trial period at shopify.com/pfp
• Policygenius: This is where I got my term life insurance. Policygenius made is so easy. To get your term policy go to policygenius.com and make sure your loved ones are safe.

 

Connect with Carl and Mindy:

Mindy’s Podcast : The Bigger Pockets Money Podcast

The Bigger Pockets Facebook 

The Bigger Pockets Twitter

The Bigger Pockets Youtube

Carl’s Podcast : Mile High FI

Mile High FI Youtube

Carl’s Website

Carl’s Instagram

Carl’s Twitter

Carl’s Youtube

 

Checklist of relevant episodes:

• How to go from 0 to $4 Million in 2 years flipping land with Pete Reese
• How to Significantly Reduce Your Housing Costs with Live-In Flips
• From Flipping Couches to Flipping Houses With Ryan Pineda

 

Personal Finance Youtube Channel

https://www.youtube.com/@thepersonalfinancepodcast

FREE GUIDES:

==============

- Free Ebooks here: https://mastermoney.co/resources/

-Check out the free guide on where to put your money in what order!

https://www.mastermoney.co/stairway-to-wealth

 

-Here is the free How to Ask for A Raise ebook!

https://www.mastermoney.co/get-a-raise-ebook

 

-Get Access to the 75-Day Challenge: https://www.mastermoney.co/75daychallenge

 

=============

 

We have a YOUTUBE channel! Check it out here! 

 

Our Latest Videos:

How To Grow A Podcast Organically

What Would Happen If You Maxed Out Your Roth IRA By Age?! (These Results Will Amaze You!)

How to Become a Millionaire With a Small Amount of Money (Is it Really This Easy!?)

Pre-tax moves for high earners

 

Got questions? Ask me on Instagram Here. @mastermoneyco This is the fastest way to get in touch with me.

============

 

Want to Support the Show? Follow on Spotify or Follow and Leave a 5-Star Review on Apple Podcasts!

 

============

 

Check out all the Stuff I Recommend! 

Check out all my favorite Credit Cards https://milevalue.com/top-offers-mastermoney/

 

USEFUL RESOURCES:

• The Year-End Money Checklist https://mastermoney.co/year-end-money-checklist/
•  The 75 Day Money Challenge https://mastermoney.co/75-day-challenge/
• Finally, Get That Raise https://mastermoney.co/resources/

============

 

 

DISCLAIMER: I am not a financial adviser. This Podcast is for educational purposes only. Investing of any kind involves risk. While it is possible to minimize risk, your investments are solely your responsibility. It is imperative that you conduct your own research. I am sharing my opinion.

 

AFFILIATE DISCLOSURE: Some of the links on this channel are affiliate links, meaning, at NO additional cost to you, I may earn a commission if you click through and make a purchase and/or subscribe. However, this does not impact my opinion.

 

============

 

 

Check us out on social fam!

 

Twitter

 

Tiktok

 

www.thepersonalfinancepodcast.com

 

www.mastermoney.co

Learn more about your ad choices. Visit megaphone.fm/adchoices

Learn more about your ad choices. Visit megaphone.fm/adchoices

 

Transcript:

On this episode of the Personal Finance Podcast, we're gonna talk to Carl and Mindy Jensen about the live and flip.

What's up everybody, and welcome to. Personal Finance podcast. I'm your host Andrew, founder of Master money.co. And today on the Personal Finance Podcast, we are gonna be talking to Carl and Mindy Jensen about the live and flip. If you have any questions, make sure you hit us up on Instagram or TikTok at Master Money Co.

And follow us on. Spotify, apple Podcasts or whatever podcast player you love listening to this podcast tune. If you want to help out the show, leave a five star rating and review on Apple Podcast or Spotify. Now, today, I'm really excited for this conversation because this is one of my favorite ways to invest in real estate, especially if you are a beginner investing in real estate, and it is the live and flip.

And the live and flip is one of the most powerful things that you can do with your money because you have to have a place to live. So why not turn an. Asset, which is your house into an amazing asset and something that I can appreciate over time and actually make you tax-free dollars. And Carl and Mindy are some of the best at this.

They've done nine or 10 of these things and have been able to do this over the course of their investing career and really, really accelerated their path to fire because of it. Now Carl is the co-host of linkand Mindy is the co-host of the Bigger Pockets Money podcast. So these are two fantastic podcasts that I would definitely check out.

And they both share their experiences with live and flips. With us today, we're gonna go through the basics of live and flips, how the tax-free dollars work, how the systems work that you put into place. We're gonna go to the most important part, which is finding properties and making sure that you buy live and flips right?

We're gonna talk about the funding and how they actually fund these properties. We're gonna get into the repairs because the repairs are a massive part of live and flips because you have to be able to do the repairs. That's a big part of the strategy. Then we're gonna get into what are some strategies that you can.

To sell your live and flip after a couple of years, once you've owned that property for at least two years. And then we're gonna talk about their best live and flip and their worst live and flip stories as well. So without further ado, let's welcome Carl and Mindy to the Personal Finance Podcast. So Carl Mindy, welcome to the Personal Finance Podcast.

Hey Andrew. Thank you so much for having us. Yeah, this is super fun. We are so incredibly excited to have you here because you guys are some of the experts in Live and Flips, and we've talked about Live and Flips in this podcast a few times, and I've done one live and flip in my life as well, and it was one of my.

Favorite ways to invest in real estate, and it was the first way I invested in real estate as well. But you guys have done way more live and flips than I have, and you've probably had some trials and tribulations, but in addition, you've had some successes with the live and flips as well very early on.

And I remember reading your blog a very long time ago and kind of watching your progress as you did some of these live and flips. So I'm excited to talk to you guys about this today. So first of all, can you tell me about yourselves and how you got started in live Flip? Yeah, we got married, geez. Our 21st anniversary is upon us in one week from now.

And slowly thanks for outing me , and slowly before that the dinosaurs are on the earth. No, we are not actually that old, but yeah. Yes we are. We were married and we decided to move into my house. We both had our own houses at the time. Mindy had a condo. I had a house, and we decided to move into mine. I had this problem with a shower where the water supply would not work.

It was leaking all over the place and had issues. So I called up this plumber and the plumber's like, yeah, I'll be over tomorrow. And he didn't show up tomorrow. He showed up like a day late and then he came, looked at it. He's like, yeah, I can fix that. It's gonna be like one or 200 bucks, something like that.

I can come back tomorrow to fix it. So I said, okay, great. Done. Deal. So I wait till tomorrow. He doesn't show up. I calm me. Still doesn't show up. I call him again. No, I, I, I can't get ahold of this guy. So I was kinda angry. Uh, I'm like, well, I wonder how difficult this would be to do myself. I had never really done work on houses before, so I went to the library again, we're old, so there was no YouTube at this time.

I, I go to the library and I get this book about basic plumbing. I'm like, oh, look at that. It's just this little. Washer thing and it costs like a dollar 25 at the home improvement store. This might have been pretty Home Depot. So I went there and bought this thing and I fixed it in like an hour. Wow. That wasn't that hard.

And I, the piece was a couple bucks. I just saved like a hundred or 200 bucks from what this plumber would've charged. And then he called me back a week later and it was so gratifying to tell him, ah, no, I don't need you anymore. I fixed myself. So that got us thinking, how hard is this stuff? And from there we did a tile job and from there we cabinets, and then we did basic electricity and then drywall fixing.

And what we found is this stuff just wasn't that difficult. And the other thing we found is this house we had purchased for $140,000, we did a bunch of cosmetic stuff to it and sold it for two $40,000. So we're like, you know, we don't have kids yet. Let's buy this and do it again. We made a lot of money and tax free money, which we'll talk about a little bit later, and that set us on the path to do a bunch more.

And I think now we're on nine or 10 and that is absolutely incredible. H kind of how it snowballed for you guys as well. And doing your own work is a big part that we can talk about here coming up, but I think that's a very interesting way to do it as well. Cuz when I did mine, I didn't do as much of my own work as you guys in it, but obviously increases the potential to profit on some of these houses.

But before we dive into this, People who have never heard of a live and flip before to kind of get an explanation of what it is. So can you explain what a live and flip is? Live and flip is when you buy a house and move into it and it isn't perfect. Maybe it is, uh, shrine to 1970, or maybe there is some work that needs to be done.

Maybe you need to move some walls or add some square footage to it. Remodel in some way. And so while you're living in the house, you are remodeling the house. What makes it a true live and flip is when you live there for two years. And the reason is, uh, section 1 21 of the i r s tax code says that if you live in a home for and own it for two of the last five years, you can sell it And.

No taxes on the gain up to $250,000 if you're single and up to $500,000 if you're married. So we have paid no taxes on all of these flips because we've lived in them for at least two years, and we are married and we've never made more than $500,000. Actually come anywhere close to that. Actually, I have a new goal to pay taxes on my gain because I have made so much money on my flip that I can then have to, uh, pay taxes on it.

And that's the gain. That's not just the difference between what you bought it for and what you sold it for, that's what you bought it for, plus all of the rehab that you've done to it. So the cost of those rehabs. That's your cost basis. So that amount subtracted from the amount you sell it, and you guys can see how incredibly powerful this can become, because if you have this tax-free growth, this is so incredibly powerful and that's why I absolutely love that part of it as well.

If you are looking to do something like this, this is a fantastic way to save on taxes. And within that code, Mindy, there's also, you don't have to live there for two years in a row, right? You can do it within a timeframe where it's like two years outta five. Is that right? That's correct. It doesn't have to be two solid years.

You can live there for a year, move out, rent it out for three years, and then move back in for another year. You've satisfied the two outta five rule. Now, I do wanna caveat, that's the current rule. Who knows what's gonna happen in the future, but that's what we have been operating under for the last 21.

It's actually more than 21 years. Carl said We got started at his house. I actually got started at my own house. I didn't have much money, so I bought a condo. I fixed it up cuz it was a dump, and then when I sold it, I bought it for 49.5 and I sold it for what, 74,000 or something, which is an absurd number to even say right now with how prices are going.

But in four years I made $25,000 on a condo that cost me $50,000. Like that was pretty. It's so cool because you're living in a house and usually houses aren't that great of an asset when it's your personal residence. They get on average like three to 4%. If it's a rental, it's a different story obviously, but you're turning that asset that's not that great of an asset into something that can be a really, really great asset over time, over the course of those two years, and this can really snowball over time as well where you can reinvest some of these profits and invest in either real estate.

In the market or whatever else you want to do when you start to do this. So this is a really cool way to start to invest your dollars over time, especially in markets right now when you know we have really high markets right now, so this may be a another strategy that you can get started investing in real estate if you can find deals that work really well.

So I wanna kind of talk through finding properties because this is obviously one of the biggest factors you make all of your money when you buy the property. So this is a major, major thing that a lot of people need to understand. So when you start to look for a new live and flip, how do you go through that process?

Yeah, so I think this is the biggest, most important factor. I always tell people it's better to wait for a great deal than to jump in on an okay deal. Uh, so. We look for basically three things. The first thing we want is a city that's doing well and is on the upswing. When I think about a place to buy, I want to buy in an area that if I did absolutely nothing to this house, it would probably beat the average house appreciation, even if we did absolutely nothing.

And that's because the economy is growing and the town is on the upswing. So we don't look for a perfect, shiny, really nice town. We look for one that. Might have been a little bit rough, but that's on the upswing and, and Longmont fit that bill perfectly. We used to have a Turkey processing plant on the beautiful Main Street, and now since we've moved there, that is gone and there's retail space and high-end apartments there.

So that's the first thing we look for. The second thing I look for is the neighborhood. We want houses that are probably. I don't know, 30 or 40 years old. Some have been updated, some have not. Of course, I'm looking for the ones that have not been updated. I look for houses in that vintage because super old houses can have a lot of other issues like foundation work and stuff like that.

We want to do mostly cosmetic work to it. The thing I look for, I made this up and I call it the dumpster indicator. So I'm looking for a neighborhood . I like that term. We drive around and look at the number of dumpsters, and this came from, I read a long time ago, someone was talking about cranes in big cities.

So if a big city is loaded with cranes, that means there's lots of development work going on. There are, people are putting money into it. If I see dumpsters, all the neighborhood, it means that people are moving into this neighborhood. And spending money that is going to increase the average house price.

So I wanna see dumpsters everywhere. I also like looking at 'em. You can, we found some really great stuff in dumpsters, , but, but, but that is a whole other story. So, so number one was to look for a city. Number two is to look for an area of the city with a lot of dumpsters that people are putting money into.

That might be 30 or 40 years old. And finally number three is to look for the house itself and. Yeah, I alluded to this before. We like looking for houses that are old and crusty. And I call this the pink toilet indicator. I love houses with pink. I, we had a house like this before with pink toilets and blue bathtubs, cuz that stuff is old.

No one wants it anymore and it's not that hard to fix. It's not like we're raising a foundation or fixing a roof that's caving in which we've seen. We want easy cosmetic work. So go for the city and then look for the neighborhood, and then focus on a house. And the number one tip I could give people is once you've located, once you've figured out what neighborhood you wanna be in, sign up for real estate listings and study every single one of them to find our current house, the one we're sitting in right now, we look for about two years.

We would look at every single real estate listing and we would go see most of the houses that came on the market. So as soon as one that popped up, we could look at the listing until within probably 30 seconds, whether it was not pursuing, but you really have to put your time in. Yeah, and you want to be really honest with yourself.

What is your pain threshold? What is your talent level with regards to repairs or finding contractors? Um, finding contractors can be really difficult. So if you're coming from a family full of contractors, awesome, but if you don't know a soul in the industry, you're gonna have a really hard time getting the work done If you don't know what you're doing or how to do it.

YouTube University will walk you through step by step. Any repair, any rehab, anything you wanna do, you have to be honest with yourself. Do you have the time to do it? Do you have the skills to do it or the desire to learn and you know, do you wanna live in a construction zone? We are gonna talk about how great it is cuz we're cashing hundred thousand dollars checks every two years.

How much was this spruce house? Like 2 75? How much did we pay for it? No, how much did we make off of it? Oh yeah. Like 300,000. Yeah, 300,000. That was really awesome. But living through a construction zone can really suck. So be honest with yourself before you start. And I'm glad you brought that up cuz that's just a huge factor that most people may be going into this and they just don't think about that part.

You're living in a construction zone. You may have things that are just unfinished. Maybe you only have one or two bathrooms in that house and one of those bathrooms is down. So now you have an entire family utilizing one bathroom where you can think, what would you do if you didn't have a kitchen? You have to order out all week long and kind of go through that process as well.

So this is a major thing to kind of think through and I love the idea. The pink tile, the pink bathtubs, those types of things. That was what my first house had as well. And it's one of those things where people can't kind of visualize what this could become. And so most people don't want that, but it's very easy to fix that stuff and it's very easy to have that stuff fixed as well if you don't wanna do the work yourself.

So that's a really cool way to kind of think about it as well. So I love that. So those are some major factors I can tell you, like my first, the one that we did, we had carpet in the kitchen, the actual carpet, shaggy carpet in the kitchen. The walls were purple. So cosmetic stuff is the easy stuff, and that is, I really look for, even in, when I invest in rental properties, I'm always looking for cosmetic repairs first because obviously that's the stuff where a lot of people can't visualize what the property can look like, and at the same time, you can fix those cosmetic things and cosmetic repairs aren't that big of a deal.

And then Mindy brought up the side of with contractors, and I think that's a huge factor as well as finding the right contractors. If you're not in this industry, if you've never done it before, it is very difficult and they are very difficult to manage at times as well, especially when you have deadlines that you want to hit.

And so if you're getting closer to that two year point, you want to sell this house and then find another one. Sometimes it's harder to get contractors in there. So you gotta have good planning processes and have this all in place as well. So I absolutely love that part of it. So are you ever willing to do repairs to a live and flip if they're not cosmetic or have you ever done that before?

this is so timely. , uh, we have done non-cosmetic repairs. Have added a second story on two houses. Wow. I don't think we will ever do that again, because that is a lot of, it always happens in the wintertime too. We had a really unpleasant experience with that both times. I think we're gonna talk about that later.

So I prefer cosmetic repairs. There are a couple of repairs that I don't wanna touch. I don't wanna touch a broken foundation. Yeah. Because I don't know anything about it and I don't wanna. There's plenty of properties that are hideous that don't have broken foundations, and I don't touch meth houses.

That's a personal thing. Yeah. In our current house, on the one we're working on right now, we discovered that they had put all the plumbing in an exterior wall, and we're in Colorado and. You don't do that cuz the pipes will freeze. So the previous handyman was incompetent. He had also misfired a bunch of stuff.

So sometimes even if you don't go in there expecting these kind of problems, you find them or they'll find you. That plumbing ones certainly would've found us if we wouldn't have found it. Yes, yes. A couple of weeks ago it was, uh, what, 10 below zero with negative 50 wind chill, and it doesn't really get that cold here in Colorado.

I think that's the second time it's gotten below zero since we've lived here in 10 years. But it doesn't matter how frequently it happens, it matters that you own the house when it happens, and those pipes would've. We had two friends who had pipes that froze and burst during that spell. So that would've been a huge disaster to repair, uh, if we hadn't found that.

Absolutely. Adding a second story, that is something that can be very difficult, especially if you're living in the property. That's incredible. And I can kind of see that's. Side of it as well. The only major repairs that I've ever had with rental properties or anything like that is typically stuff that I couldn't see at first.

So there may be like pipes that we had to to fix or things like that, but typically I try to look for cosmetic stuff first. If it needs a new roof, that kind of thing. Roofs are pretty easy to hire contractor out and get the pricing for, but some of the other stuff, foundation, I agree with you, the same type of thing where I'm not gonna touch anything with a messed up foundation.

When you analyze these live and flips, let's say you want to go through and run the numbers, and we obviously know that running the numbers is the most important thing that you have to do when it comes to analyzing these properties so that you can figure out what your profit is gonna be, and that is how you make your money is when you enter into the property.

So when you analyze these live and flips, how do you do that analysis? Do you do on a spreadsheet? Do you use a calculator? What is your favorite way to do that? I'm a real estate agent and we are in Longmont, and I am in and outta so many houses in the city of Longmont that I have a fairly good idea of what houses are selling for in different conditions in already fixed up condition in not yet fixed up condition.

So, That's something that's really important if you wanna be a real estate investor, if you want to start live in flipping even, you need to know your market. And I can tell you fairly accurately what a house, like a price range that a house is gonna sell for. And that's just because I know the market so well.

So when I'm analyzing live in. I'm looking at the house, they only want 400 for this. Oh my goodness, what's wrong with it? Let's go see this. Or they want six 50 for this. It's never gonna sell for that, but I'll keep an eye on it to make sure. And lo and behold, I'm right. It's sold at 6 0 5 and I knew that because I know the market so.

How do we analyze them? We know the market really, really, really well. I've been an agent for 10 years and I have had a MLS listing set up for any house in Longmont that comes up, I think under a million dollars. I don't care if it's over a million, I'm not gonna be looking at those, but anything under a million dollars, I know that the house has come on the market and.

Just kind of keep an eye on it. After a while, you just kind of get to the point where, you know, um, once we're in the property, we're looking around, we know how much a kitchen costs because we've done it so many times. We know how much a bathroom costs, we know approximately. When you're walking through, you can just kind of guesstimate, oh, I think we're gonna be 40, 50, $60,000 on this.

So you plan for 60 and you hope for 40, but you always wanna plan high. Yeah, I do do a spreadsheet too. Uh, one helpful tip is Ikea kitchens are pretty underrated. You can plug in the dimensions of the potential house you're gonna work on and plan a kitchen out in probably five or 10 minutes, and they'll spit out the exact price right then, and that's probably gonna be your most expensive.

Thing as well, your most expensive cosmetic change. So yeah, once you've been through it, a lot of times we can do a pretty quick and dirty estimate as to what everything is gonna cost and then add 20% to that cause, uh, easily add 20% to that. But I think that's really important. Do a quick and dirty estimate.

If you're walking through a property and it's listed at 500 and it needs $150,000 worth of work in your ballpark mind and you know it'll never sell for six 50, that's not a good. It's easy to just move on. It's really easy to cross off houses quickly just because I know how much work costs. There's a really great book from Bigger Pockets Publishing called the Book on Estimating Rehab Costs.

It's written by Jay Scott and he did a survey of different people around the country. How much does it cost for a roof in your area? How much is it cost for drywall work? How much does it cost for all these different things? And it's a great way to. Get a good estimate on your rehab costs if this isn't something that you're doing on a frequent basis.

Yeah. There's one other real quick thing I'll add to this. We always try to anticipate what this thing is gonna sell for in a couple years when it comes time to sell, but two years from now, you have no idea what the market's gonna be doing. Like right now, when housing has crashed, we had this. But the beauty of a live and flip is you need a place to live.

The worst case scenario is the market takes a big dive and you're living in this beautiful house cuz you fixed up. What do you do then? Just stay in the house for a bit longer. That's it. Wait for the market to recover. Yeah, I think that's really important to note that you've already got an exit strategy and your exit strategy is just to stay put.

You know, take your two years and turn it into four years or whatever. So that's important when you're choosing a house. If you don't wanna live in that neighborhood, don't buy a house in that neighborhood. If you don't want to live in that city, don't buy a house in that city, just cuz it's cheap, doesn't make it a good deal.

Exactly. That's one of the most important factors, I think, is people kind of have to think through this. When you're looking for these properties, you have to be willing to stay there, especially if you have a family or kids as well, thinking through, well, what schools would they be going to? How would you actually have to operate your family in this area?

So you gotta make sure that this is an area that you definitely wanna stay in, especially if we have somewhat of a downturn during that timeframe. You know, you get two years later, maybe we have somewhat of a recession or a dip or something like that, then you have to be willing to stay put in that area as well.

Now, In Jay Scott's book, who you mentioned earlier, that's the first book I ever read on learning how to actually figure out rehab costs years ago. So I love that book as well. I definitely recommend that one. So if someone doesn't have as much experience as maybe you both do, how would you recommend them go through this process?

Should they practice running the numbers on these properties? Should they do a certain amount before they actually get into this? Or how do you recommend them kind of thinking through this process? Yeah. One thing that makes a little bit easier is if you move into a community that has a cookie cutter community or semi cookie cutter community, cuz then you could see, okay, what we did with this, I'll back up a second.

What we did with our neighborhood now is we walked through our neighborhood and we found every single model of the current house. So I think there's about 200 houses here and there's like 18 versions of our house, and we plugged all that into a spreadsheet. It took the average of that, so we knew exactly.

What we should be paying for the house and what we thought we could make from it. Like you try to see them and you can go on zillow.com or realtor.com and see pictures of the house. So, hey, look, this one's sold for a premium. Let's see what it's sold for. Or this one seem to sell for a discount. Let's see what the pictures of it look like.

Yeah, I might say, look at the condition of the house. So, It makes the analyzing part of it much easier. If you move into a house where everything is custom or a neighborhood where everything is custom, or the houses are unique, it's going to make the job a little bit more difficult for you and probably make it a little bit harder to sell as well.

Yeah, and I think that you should be analyzing properties well before you start making offers on properties. Go to open houses. It's free to go to an open house, walk in the property and see what it looks like. Oh, they want $500,000 for this house, and it's a dump. I wonder if this is something that's going to be, you know, when it's fixed up, what is it gonna be worth?

Connect with a real estate agent and talk to the open house agents until you have an agent that you feel. A good connection with, ask them to run some numbers for you or simply run a search. Can you tell me all the houses that sold in this neighborhood in the last year? That's a three second search on my mls.

It's very easy. I run it. I send it to you. I do it when I'm having my coffee in the morning. If your agent is unwilling to do that, don't work with that agent because they're gonna be unwilling to do a lot of other things. It should be a very easy process. Every MLS is different, of course, cause why would we have uniformity in this industry, but.

Every agent should be able to do this very quickly, and if they can't, that's a great way to screen out the agent. But yeah, you wanna see what's been selling and in what condition, even though you can't get into a house that has sold, most of the time, the pictures are still up on the mls, so you can see the condition.

You should be running the numbers. On these properties, run 'em backwards too. Like go and see a house that's sold. Oh, it's sold for four 50. This house looks like it needs a new kitchen. So that'll be this price and a new bathroom. That's this price. And get good at running these numbers. Go to Home Depot and spend time walking through the aisles.

Just, oh, I didn't know tile was $27 a square foot. Or it could also be $3 a square foot. So then when you're looking at houses, You can start to get familiarity with how much a job costs plus read that book. These are great tips cuz that's exactly what I did too, is every single day I set a goal that I wanted to analyze X amount of properties.

So at first I would do five properties every single day. And you start to really get a feel for what your market is and what the costs are going to be. And then I did the same thing. I would run the numbers backwards as well. I would look at sold properties and I would say, how much did they buy these for?

What did they do to this property? What was the condition beforehand and what are the, some of the things they did? And then I would try to actually work backwards and see how much would this. All of this work. So I think that is a great way to do it and really just practicing. Practicing is one of the most important things that you can do when you're running these numbers.

You have to do that before you jump into some of these because you are gonna make a mistake if you don't. If you don't have an understanding of how this works. This is the most important factor. That's why I wanted to spend so much time on this is cuz it really is so incredibly important for people to understand this part.

Now, when it comes to funding, this is obviously a big one for people as well, obvious. As the homeowner, we're gonna live in this house. We have a lot more options to funding than you would if you bought it as a rental property or something else. So how do you typically fund these properties? Do you do a specific type of loan every single time and or when you buy your second live and flip or your third live and flip, do you use some of the profits for the next one?

How do you actually think about that? That is a super great question, and yet again, another reason why a live and flip is so awesome. We are funding these properties with owner-occupied loans. Traditional mortgage, we call up a lender and we ask them, you know, what are your rates for an owner-occupied loan?

What is it at this amount down? What is it? At this amount down? An owner-occupied loan can be had for as little as 3% down with a conventional 3.5% down with an FHA loan, 0% down with a U S D A loan or a VA loan. Some conditions may apply of course, but you know, there are a lot of low money down options.

Whereas if you're using traditional mortgages to buy an investment property, you're lucky if you can find a lender who will get you in at 20% down, it's usually 25% down. And if you're buying like a duplex or a triplex or something like that so that you can house hack, you are needing to show like six months of cash reserves on top of your down payment.

So one of the best ways, in my opinion, to invest in real estate is to do a live and flip, because A, you need a place to live. B, you can get in with a super low down payment loan and your lender only requires you to live there for 12 months to satisfy your owner occupancy requirement. Then you can move out, keep that low down payment, lower interest rate owner occupant loan, and turn it into a rental so you can do the live and flip strategy.

If. Situation changes. You can turn it into a long-term rental. If your neighborhood or city allows, you can turn it into a short-term rental. You can turn it into a medium-term rental. There's so many exit strategies with the live and flip, and the reason that it makes so much sense is because it is, you're getting in with the lowest.

Down owner occupied loan. Yeah, and I'll say one other strategy that we've done a couple times for our last two properties is we find a way to come up with cash to buy the house. We might not actually have the cash, but we might borrow from a helot from our previous house or a margin loan from our investment account.

So what that allows you to do is go to the seller and say, Hey. I can close in like a week. I can close in in eight days if you accept my offer. Uh, here's proof of funds, and then what you could do after you've bought the house is do a cash out refinance and then get a conventional mortgage, but a times a seller, especially if the has been on the market a while, which was the situation with our current house.

They're worried and they just want the money. So you might be able to negotiate a better price if you can come in there and close quickly. Exactly. I found that in so many different situations where a seller is extremely motivated, especially if that house has been sitting, like you said, and they're starting to panic, cuz a lot of times they wanna get outta those houses.

So if you can close really quickly, that is something that's really gonna supply their need and really, you know, fulfill that need that they have and you get a house at a better deal as well. And then you can go back, refinance it since you're living in that house. Some of those great terms, and I love what Mindy said about these multiple exit options because when you invest in real estate, you want to have multiple exit options just in case something happens with the market.

So if you run the numbers as a rental property as well, see if this cash flows, if it fits your criteria, you can see if this is something that maybe in a year down the line, you wanna start to build a rental portfolio. Now you have a rental property there, but. If the market starts to really appreciate, then you can also do the live and flip in a year later and get that tax free growth on some of that money on those gains when you get to that point as well.

So there's a lot of really cool things and really cool options that you can have here. And a lot of these are made possible by the flexibility of funding as well. So having that 3% down is really powerful for a lot of people, especially if you don't have a lot of money. You have. So, Flexibility when it comes to doing live and flips.

That's why I absolutely love this strategy as well. I think it's one of the best ones that you can ever be interested in when it comes to real estate and when you're starting off as well. So one big one I wanna talk about is repairs. And now we've mentioned repairs a little bit already at the top of the show, but when it comes to repairs, you do your own repairs.

So you went through the process of kind of learning how to do this stuff. Is YouTube the biggest way that you learned how to do this? Earl, I, I know early on you went to the library and kind of figured that out, but as time has progressed, do you use YouTube most and that's kind of how you've learned how to do most of this stuff?

Or do you have, you know, friends who are handy as well that can kind of help you with stuff? Oh, YouTube is so good. YouTube is so great. I can find the most obscure washing machine that has a problem and I Google the product number on that. And sure enough, there's some person on YouTube. Who has fixed that, and we'll show you step by step how to do it.

I'm so thankful for YouTube, and if that doesn't work, sometimes just a plain old Google search will do the job, great. You're having a problem and that works fine. Um, one thing I wanna say is in most municipalities, uh, people have asked us, Hey, are you doing this on the up and up? Do you get permits? And yes, we do.

Um, every place we've ever lived in has allowed the homeowner to do the work themselves. I've only heard of one state that doesn't maybe perch the Massachusetts, some of them have a provision that you have to live in your house for a year after your repairs are done. So you wanna get your permits closed up before they want you to sell it in case you did do something wrong.

But yeah, I just wanted to mention that. And, uh, We've never had an issue with permits. In fact, it surprised me how nice usually those people are to work with. So I'm going off on a tangent here, but I just wanted to make that clear that we do do the work ourselves through the help of YouTube and Google and we do it on the up and up.

I think that's important to note that we are getting permits. Um, you are. Ideally doing a live and flip to sell it. After owning it for two years, your buyer is going to see that there was work done and is going to ask, were their permits pulled? When you say no in a hot market, maybe they don't care.

Maybe they do care and they leave. If you say no in a down market, your buyer is going to demand that you get the work permitted and the permit process. Can be very difficult if you did the work without the permit. I've seen people having to rip open drywall to prove that the electricity was done properly or that the plumbing was done properly.

Do yourself a favor, even though it seems like a hassle, go to the permit office. Open up a permit for whatever you need to open up a permit for. And not everything needs permits. You don't need a permit to hang cabinets in our city, but it also doesn't matter what my city says about permits. It matters what your city says about permits.

Talk to the permit office. Do some research ahead of time. I have found that the permit office is always really, really helpful. If you go in with armed with some information, Hey, this is what I think. Can you verify? They'll say yes. You say, how do I get this permit? They'll tell you, you write 'em a big check.

Cause that's part of the process. And then you start the work, you get the permits closed out in a specific order. And as long as you're nice about it, they're nice too. I couldn't agree more. And we have done that process as well where you definitely wanna get those permits ahead of time and learn the process.

And I've walked into that office, I've asked them a bunch of questions. They're always really nice in my area as well. So that is the best way to do it, is kind of walk in, say, what do I need to get permitted? Usually I have little forms that they can hand you that tell you some of the stuff that have to be permitted and then they can walk you through some of the work that you're doing as well and make sure you get that done.

Cuz you can run into all kinds of problems if you. Do that. Have you ever miscalculated repairs before ? Have we ever not miscalculated repairs? Cue the scary music, ? No. Never. Everything always comes out perfect. Every single time. Um, Which time do you wanna talk about? Well, we did pretty good. The house we're working on now, we did pretty good, but there was some scope of creep involved.

But if we were smarter about it and had thought more about it, maybe we would've anticipated that we would need to do the bathroom cause of some flooring issues. Everything always costs more than you think it would. I would always assume that, and like I said, I think 20% is a good thing to go by and that's after years of experience with us.

Uh, There's always gonna be parts that you need, or plumbing supplies or something's gonna go wrong. You're gonna find things that you didn't anticipate. Always be very, very conservative. on this end. Build that into your calculations. Yeah, and cut costs. Not cut corners. Cut costs when you can. You love this tile.

It's $12 a square foot, but there's another one that. Equally decent for $5 a square foot, go with the $5 a square foot tile because you're saving a lot of money there. That is absolutely gonna be spent someplace else. I can almost guarantee it. I agree. And I think it's one of those things where you have to have that margin of safety, especially if you're new to this.

You have to have that margin of safety. Cuz I have never, ever nailed my repairs either on any rental property or house or anything along those lines. Especially if it's in our own house. Usually there's more things that we want as we get into that house. So that's definitely a huge factor. Have that margin of safety, whatever percentage kind of works for you.

I think that 20% number is a fantastic one as well. What are some of the downsides to live in flips? We've obviously talked about living in a construction zone. What are some of the other downsides that we have in play when it comes to doing this? Ooh, we have a couple good stories. Andrew, you mentioned living in a house with only one toilet.

In our previous house for, for a while, we lived in a house with zero toilets, . So what I'm getting at here is you're living in a construction zone. Again, cue the scary music. Uh, one of the houses we did back when we lived in the Midwest, I remember we didn't really design our life, right. We both had full-time jobs and each of our commutes was three hours long.

So we would wake up. Five 30 in the morning to make it downtown to the city. We would come back like at six stuff, some food in our mouth, work till midnight, , get five or six hours of sleep, and wake up and do it again. And then we would do it all weekends. Our friends would be like, Hey, how about this TV show?

Or this movie? Like, well, I haven't even heard about that yet. Sorry. And I remember at the lowest point, there was one time where Mindy had done a load of clothes. And she had folded it up, put it nice in the laundry basket to be put away, and we both look at it and it's covered with a layer of drywall dust, and I think she started crying.

And rightfully so. We're both tired. We're B, we're both exhausted. I have wounds on my hand. I'm always hurting myself. I'm up to date on my tetanus shot. Yeah, that was a definite low point. So you are gonna be living in a construction zone. And I'll back up a second and say this strategy is one to do before you.

You have children. Right now we have kids and we've done it with them. And your time should be to them, not to working on a house. So this strategy is for the young and and energetic . I still have energy. I'm not so young and I have kids. Yeah. So the main, absolute downside is you're gonna be living in a construction zone.

You're gonna be maybe, Having a crockpot in your bathtub and that's how you cook dinner for the week. And then you eat the same thing for the next four days. Cause all you have access to is that crockpot you're gonna be doing dishes in your bathroom sink cause your kitchen is demolished. So you have to be willing to put up with some pain.

But I'll say everything I just said, probably scared a lot of people. But when you get that huge check after two years, it, it makes that pain. D. Yeah, what I said, just might have scared some people. If this scares you, then this strategy is not for you. And be honest with yourself, and there's all levels of this strategy.

You could buy a really beautiful house that somebody decided to paint every wall purple. In this market, there are people who don't wanna deal with painting the walls. You could get a big discount just cuz somebody had bad taste in paint. Installing flooring is a pretty easy thing to do. So if there's really ugly shag carpet and purple walls.

But the kitchen is nice and new or beautiful or beautiful ish. You could buy that house, install the new floors, or have the new floors installed, paint it, and then you've got a beautiful house for a discount. There's all levels of rehab to be done. And one thing Andrew said at the beginning, he's like, oh yeah, you're getting takeout every week.

I didn't realize that was an option. So I was doing dishes in the bathtub and crockpot meals because. I didn't realize we could just go out to dinner every night. That's not what my frugal heart says is. Okay, . So Andrew, one quick thing I'll say to the upside and to hopefully inspire your listeners if we have just reinspired them, is I did the numbers a while ago and I think we've made between seven, $800,000 profit just from this.

Just from being able to put up with a little bit of discomfort, maybe a lot of times, but some discomfort, and two TEUs shots, seven to $800,000, and then we've reinvested that money. So once you do all those calculations, we've made millions with an S on the end of that. Because of the money we made and reinvested into things just like index funds in the stock market.

So yeah, I don't regret, I, I regret some small decisions, but I don't regret this strategy one bit. And that's the important thing to note here is are you willing to kind of put up with some of that stuff? Especially a lot of people who listen to this podcast are really interested in financial independence, so a lot of people are on the path to financial.

I. And just think about how big of a difference it can make is that if every two years you're making 20 to a hundred thousand dollars profit on something that's completely tax free, that you can now put towards your fire financial independence and fuel that fire with those dollars. So is that worth it to you?

Because you can get to fire so much faster if you actually. Put these extra dollars towards that. And you heard Carl just now say seven to $800,000. I mean, that's an extra 30 to $35,000 per year in retirement that you can draw down if you use the 4% rule. So just thinking about that is really, really important.

Weighing all of this stuff out, is it worth it? To live in a way where maybe it's not a normal way to live, but at the same time, there's a lot of benefits to this as well. But if it does scare you, Mindy's, right, it may not be the strategy for you. So you gotta find either properties that don't have as much work, like just painting the walls, maybe doing some minor things.

If you have multiple bathrooms to a bathroom, you can still find a strategy like that and or maybe it's just not the best strategy for you at all. Now when it comes to selling these properties, we get past our two years, we hit that two year point, and we wanna sell our living flip. So do you have any tips for selling properties?

If you do, how do you minimize some of those transaction costs? Cuz obviously when you sell a property, you take on a ton of transaction costs as. Yeah, when you sell, typically the seller is paying the commissions for both the buyer's agent and the seller's agent. So the obvious is to just not use an agent and go F S B O.

That doesn't always work. And in a slower market. That's gonna make it more difficult to sell. It's gonna take longer. So be honest with yourself. I mean, that's my number one recommendation is be honest with yourself. What's your timeline? What's your need for a sale? Um, FSBOs take longer to sell. If you need to sell it right away, maybe you have found your next house to move into.

You need to sell it, put it on the market at a slightly lower price. If your real estate agent says, Hey, comps in the area are between five hundred and five twenty five, go closer towards 500. It's in the long term, what is an extra $5,000? Right? Versus selling the house quickly so you can move on and go do something else.

And we have a great tip. It's something we did many years ago, which we're thankful for. You got your real estate license. I have my real estate license, which is a great tip, but be aware of what that entails. It is, um, I think it costs something like $3,500 to get my real estate license. With all of the coursework and all of the testing and the all the things.

It was approximately $3,500 to get my license and have it for the first year. However, when you sell a house, At $500,000 at a 3% commission for just the sell side, that is $15,000. So you can save money doing that. Again, be honest with yourself. Do you have the time to put into it to get your real estate license?

Do you wanna act as a real estate agent in any capacity or do you wanna just sell it and be done? Eh, just to be clear here, you got your real estate license for the sole purpose of this. Well, Mindy has worked with people since then. That's not why we got it at all. Yeah, that's not initially why I got it.

Now I work as a real estate agent and actually sell a lot of houses. Did I tell you I was a top producer last year? Wow. I forgot to tell you that. Congratulations . Yeah. Happy side effects. Exactly. That's incredible. And I, I actually got my, when I was younger, I got mine as well just to invest in rental properties and it just made the process a lot easier to make offers.

Figured now, I went through and did the math one time, and it was well over six figures that I saved just by doing this from the amount of houses that I've sold from rentals to personal residences. So it is definitely a strategy if you have time, it's a great strategy to look into so that you have access to the mls, you can have access to some of these.

Properties and in addition, be able to sell those. But obviously that's not for everybody. But if you do have that timeframe, it really is helpful. It's extremely helpful to know how to do that as well. So I wanna go through some of your best and worst living flips, just to paint a picture of what best case scenario and worst case scenario of what can happen here.

So can you kind of talk through both of those? Whew. What was our best live and flip experience? Probably the one that we just sold a couple of years ago. We moved into a house in 2013. It was a very tiny house. It was two beds in one bath, and we ended up adding a second story, and it went from two beds, one bath to four beds, three baths, and.

Had a great experience with the live and Flip because it was a great street. We made a lot of friends on the street. We sold at maybe just before the top of the market, so we made a ton of money. I think we brought home $275,000 after selling, like we bought it for one 40 and we sold it for 5 98. Yeah, it was something like that.

1 76, a purchase price, 1 76. That's and probably put like, Yeah, adding a second story, maybe not the most fun ever, but overall, the house looked amazing when we were finished and yeah, nothing really, really, really catastrophic happened. Yeah, except the rain and I gained lot, lots of new school, not lots of new skills.

A quick, a quick aside. It's so nice when something breaks in your house and you can fix it yourself instead of paying a big fee to someone who may or may not show. Exactly. I think that's a huge key as well that can come outta this, is you have all these extra skills in play that you can utilize. Now, Carla, did you put that second story on yourself or did you have help with that?

Uh, we paid carpenters to do the rough work, and then we did stuff like the electricity. We did all the flooring, we did all the finished work on the house. So we paid someone to frame it, do the roof, get it weather tight, and then everything else was up to. That's absolutely incredible. So really in those couple of years, you made well over a hundred thousand dollars per year just for living in your house and doing some work on it as well.

So that's fantastic. What is your worst live and flip? Okay, I'm gonna paint another scary, scary picture for you. Uh, we had a two month old child at home and this was our other house where we decided to add a second story and similar, we paid contractors to frame it out and then we would finish it. So they had framed out the top, but it didn't have a roof on it yet, and there were all these tarps on it.

So we start watching the Weather channel, we hear there's storms moving in, and sure enough there's storms moving in. They don't look too bad, but then they did get bad. So what happened is this super strong wind kicked up and blew all the tarps off the roof. Then it looked at the weather and you know they've got those colors you go on.

The weather shine on this color was like a dark purple, meaning we were gonna have some very, very, very bad rain. So it turned out to rain. Six inches that night and we didn't have a roof over our heads. So I remember at like two in the morning, you're managing the baby and we're in a bed that has a ceiling fan directly over, like centered over the bed and there's water pouring out through every light fixture in the house.

But I specifically remember the one over our bed , and we were getting like dumping any storage bins we had and putting them. Under these places where all the water is pouring in and it, it damaged the , the part of the house that we were living in, and it was just a big mess. That might've been the old time, low point I, I dunno if that was, or when we were down to one toilet, but still it's, that was the worst case.

The worst of the worst case scenario. It, uh, those things don't usually happen. Then the next day the sun came out. , we, we moved on and life was better, but. That one was rough. Uh, the other bad thing that happened during that is I talked about the macro environment. That was a luxury home and we bought it in 2006.

And if, uh, you're a little bit older, you remember what happened? Shortly after 2006, the housing market dropped. And luxury houses were especially killed. So that one we probably broke even on or maybe didn't even make money off of it . But yeah, we gotta live in a nice house for a while, so that one not so great and at least you broke even on that kind of the the worst case scenario that could happen.

At least you don't lose money and you're living in a house. So that's still better than a lot of people would do in that situation. They probably lose value on their house if they sold it at that time as well. So that's an awesome one. So I wanna shift gears here cuz this has been really fun to kind of talk through this stuff.

These are some questions that are a little bit deeper that we ask a lot of our guests, and I wanted to see what your guys' take are on, are on some of these. So what part of your worker life makes you come alive? Uh, wow. Uh, I really like podcasting. I am the host of the Bigger Pockets Money podcast, and I love talking to people about their money story and their journey to financial independence.

That's the part of my work that makes me come alive. The part of my home or my life that makes me come alive is just spending time with my kids and being able to be there when they get home from school. And being able to be there in the mornings when they're getting ready for school and having conversations with them before they go off on their day.

Yeah. And my answer would be building things and solving a problem to build something. And I was a coder and that fits the bill for that. Cause you've got a problem to solve through computer code. But I also get the same satisfaction from. Doing things on a house, Hey, this doesn't quite work out. We could do it 10 different ways.

What's the best, most efficient way to do it? And it's so gratifying to do the tile in your bathroom or solve some problem and then sit back at the end of the day and, and look back at their work and think, I did that and this is what, this is what it looked like before. This is what it looks like now.

And yeah, I'm so thankful to be able to do that in my day-to-day. I absolutely love those answers. So those are some of the, the coolest ways to actually kind of go through the process of life and kind of see what you can do and have all this flexibility that you guys have, have actually created through financial independence and some of the things that you have done over time.

So the second one is, what is the best money advice you have ever received? Okay, so tripped down memory lane, like cue that going back in time. Music. I had this grandmother who was really cranky and, and kind of an angry person. She had lived through the depression and just not happy. So whenever my sister and I would buy something stupid with her allowance money, she would get mad at us and sced us.

But the other things she would say to us every time we would go over to her house, she would get this look on her face kind of glare at us, and then say, save your. And that's it. That would be it. Save your money. And I guess it, it stuck. Cause when I finally got money in a good job, I saved it. So yeah.

Thank you. Grandma asked for instilling your money saving principles, even if your delivery was a bit antagonistic. . I love that one. I think it's the most simple advice, but it's what we need to do. It's what we all need to do in that one. Mandy, do you have. Uh, spend on things that matter to you and don't spend money, save money on things that don't matter.

Exactly. It's spinning your dollars on the things that you actually value. I love that. So the last one is my favorite. We get a pretty much a different answer every time on this. It's interesting how people kind of think through this process, and it is, what does wealth mean to you? Oh, Andrew, I'm gonna tell you a story.

I'll make it quick. When I started a blog, when I discovered financial independence and someone wanted to interview me for. A podcast and it wasn't anything big. They probably had four listeners and I freaked out. I was so nervous about that through financial independence, I have autonomy over my time and I've been able to work on my insecurities like that one, and my confidence levels.

So about a year ago, I gave a talk in front of 500 real life humans, and I was less nervous doing that. Then talking on this random podcast. That no one ever listened to on the phone to one person. So I'm so thankful that wealth gives me the autonomy over my time so I can do things like to work on myself.

It's so good. I'm really thankful and tons of gratitude for the way life has worked out. That's incredible. I love that. And it's, it's being able to have the time to work on yourself to grow and develop is, is absolutely amazing. Yeah. If you would've talked to me, Five years ago, two people have said this to me.

They're like, Hey, dude, I, I met you and you're, you're so much different than what I knew you before and better. It's better. It's not worse. , I probably worse said in some ways, so probably a couple pounds heavier. But yeah, that's probably the best compliment I ever. That's awesome. Received. What about you, Mindy?

What does wealth mean to you? Well, I wanna say something really funny, like Scrooge mixed ducks, piles of cash all over the place. But now I have to be serious because Carl gave such a great answer. The freedom to choose what I do with my time. It's not showy, it's. It's just knowing that it's there, knowing that the money is there.

I am wealthy because I don't have to do anything I don't wanna do. I love that. And that's the most valuable thing that money can provide is create that freedom for our lives. So Mindy, Carl, this has been absolutely amazing. Thank you guys so much for coming on. This has been so much fun. Can you tell us where people can find out more about you guys and what you have going.

So I have a blog and a podcast. You can find my blog@fifteenhundreddays.com. That's the number of days I thought it would take me to retire. And the podcast is Mile HiFi and Mi also has a kind of big podcast, . Uh, I am the host of the Bigger Pockets Money podcast, and you can find me all over bigger pockets.

And at Mindy Bp, M I N D Y a, TBP is my. To handle on all the social media platforms. Amazing. And we'll link all those up down in the show notes below so that you guys can check them out. I definitely recommend you check all those things out as well. And thank you Mindy. Carl, thank you so much. This has been absolutely amazing.

Ah, thank you so much. So if anyone has questions real quick, uh, Go to my website and email me. I love talking about problems and I think half my emails are helping someone solve some HVAC or rough problem, so thank you, Andrew. Perfect. Absolutely. We'll link those all up down the show notes below.