Sally was a very risk-averse woman who still wanted to get into real estate. She wasn’t ready to manage multifamily buildings and the various tenants and other issues that come with investing in real estate, so we developed a plan that would work for her.
She had equity in a condo that she had lived in for a number of years that she wasn’t profiting from. By selling the home, she was able to benefit from the IRS code that allowed her tax-free gains on that equity (i.e., profit) because she had lived in the condo for more than two years.
She loved this approach of living somewhere for two years and then selling the property without having to pay taxes on your gains, so we strategized on what type of property she wanted to purchase next to continue using this approach.
For her, a fixer-upper was very doable. She liked doing many things herself and she was very capable. We found her a great home that was owned by HUD. Many government programs like the VA and HUD (Housing and Urban Development) only want to sell to buyers who will occupy the property. They do not want to sell to a flipper or contractor who will resell it.
Since Sally was willing to live in the property, this was a great option for her to buy the home for a great price.
We all know that purchasing a home can take several weeks due to negotiations, inspections, appraisals, title searches, etc. We did not squander this time. Even before Sally owned the property, we began to meet with contractors to get estimates and schedule their services so that we could hit the ground running after closing.
Albeit Sally was handy and willing to fix some things, she didn’t want to do everything, nor should she. There are some things better left to the professional. So, we discussed where it made sense for her to put in some sweat equity and where it made sense to hire a professional.
She had a timeline, a budget, and contractors scheduled BEFORE she closed.
After closing, everything was completed like clockwork because we had a plan. It helped to keep the remodel on schedule and – equally import – keep the stress level down because we all knew what needed to be done.
Sally eventually sold that home after living in it for two years. She profited around $140,000 TAX-FREE!!!! $70,000 per year tax-free isn’t too bad as a side hustle.
She had fun. Made money. And learned a lot during the process.
Now, on to the next property!
