7 Reasons to Live in a Fixer-Upper House While You Repair It

Turn a Rental House into Your Home; Then Your Home into a Rental House?

For small fixer upper house investors, like my wife and I, it can pay off big dividends to move into the future rental property that we are repairing. We don’t always do it this way, but we find there are compelling advantages to this technique. These advantages include:

1.) Reduce Financial Strain

We don’t have to make house payments on a property that has no tenants paying rent. In other words, living in the house while we repair it is better than having it empty. If I we live in it, we make the mortgage payment that I would normally have to make anyway. However, if we tried to repair the house, while still living in another house, we have two mortgages to pay, until we can finish repairs on the new house and then rent it out.

This can be a real strain on the budget, especially when repairs go on longer than anticipated. What we like to do is to turn our former home into a rental house and move into the fixer-upper. We usually plan to stay in the new residence anywhere from 6 months to 2 years.

2.) Better Loan Terms

We get better loan terms as an owner occupant. Interest rates on a loan can be one percent lower if we purchase the house as an owner occupant, rather than as an investment property. The less we pay each month during the repair process, the better.

3.) Learn Repair Skills

Instead of rushing through the repair process and having to contract out much of the work, in a more drawn out process we can take the time to learn new repair skills. It also affords us the luxury of being able to make mistakes and learn from them. For me, at least, that is an integral part of the learning process.

4.) Make More Money When Renting

Because of the lower loan terms and lower monthly mortgage payments, when we later rent the property out, we can turn a tidier profit each month. Or, we can make it more attractive to potential tenants by offering to rent it at a lower price.

5.) Accommodates Our 8-5:00 Jobs

Feverishly repairing a new rental property nights and weekends, puts a strain on my wife and I, since we both have day jobs. Stretching out the process reduces the stress level considerably.

6.) Get to Know the House

A slower repair process allows me to really get to know the idiosyncrasies of the house. Later when tenants request repairs, my in-depth knowledge of the house may make these future repairs easier.

7.) Reduce Taxes If We Sell

Although, we believe in the buy-and-hold strategy, if we live in the house for two years and decide to sell, we can sell without paying federal capital gains taxes. If the capital gain is less than $500,000 for couples, the sale of the house is never reported n federal IRS forms.

One Caveat

If you follow this strategy and have a family, expect to live under some primitive circumstances for awhile until you start to get things ship-shape. My kids are thrilled at camping out in a new house, and as long as I get the showers working fairly quickly, my wife is happy. If you take the perspective that it’s an exciting adventure, you won’t be disappointed.

 

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16 Responses to “7 Reasons to Live in a Fixer-Upper House While You Repair It”

  1. Untemplater says:

    It’s definitely cheaper to live in a property while you repair it. It can get really stressful though, so you have to be careful not to take on too much at once, and hire reputable workers if you can’t do all the work yourself.
    Untemplater recently posted..40 Excuses Entrepreneurs Must Overcome To Succeed In BusinessMy Profile

    • Terry says:

      Good point. You definitely have to have the right frame of mind to live in a fixer upper house.

      It requires creativity and flexibity on the part of all family members.

      But on the positive side, my wife & kids and I have learned many skills we might otherwise never have learned, such as how to tile a floor, electrical wiring, replacing broken windows, etc.

      When we hire contractors, e.g., to repair the A/C or fix the pipes, we always make sure to watch and see how they make repairs, so we can learn the process.

  2. Great idea Terry for someone just getting started if they can handle the stress and the mess.

    Sharon
    Sharon Vornholt recently posted..Creating Systems and Procedures; Setting Your VA Up For SuccessMy Profile

    • Terry says:

      Yes, there is certainly some “stress and mess” involved in this technique. Sometimes stress can be a good source of motivation.

  3. I think homeowners must decide first what amenities that they can live without before embarking on a repair-the-house mission. Repairing the house on your own is a long and hard work. Even when hiring a contractor, it is going to be a great inconvenience for the family.

  4. […] 7 Reasons to Live in a Fixer-Upper House While You Repair It […]

  5. […] 7 Reasons to Live in a Fixer-Upper House While You Repair It […]

  6. […] 7 Reasons to Live in a Fixer-Upper House While You Repair It […]

  7. […] 7 Reasons to Live in a Fixer-Upper House While You Repair It […]

  8. Most new homes come equipped with lots of storage. Older homes, on the other hand, tend to lack even some of the basic storage options, such as a coat or linen closet. If you lack the space to expand closets or other storage spaces or build new ones, consider redesigning the spaces you do have.

  9. Home improvement, by definition, is making changes to one’s home by making improvements on the house’s looks. Home improvement is usually done by professional contractors, handymen, and even the house owner himself.

  10. I am looking to fix up a home where I am living there my boyfriend is into construction he knows how to build a house from the ground up we are in Bend Oregon

    • Terry says:

      It sounds like you are on the right track to an self sufficient and rewarding life. Best of luck with your house repairs.

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