Live-in real estate flipping, also known as house hacking, is a popular strategy for people looking to invest in real estate while also having a place to live. But is this strategy right for everyone? Before you dive in, there are a few things to consider.

This article will explore ten things to consider when deciding whether a live-in real estate flip is right for you.

1. Your financial situation

Before embarking on a live-in flip, you need to assess your financial situation. Do you have enough savings to cover the down payment, closing costs, and unexpected repairs or expenses?

You’ll also want to ensure you have enough money saved for emergencies and cover your living expenses while you work on the property.

2. The real estate market

It’s important to understand the real estate market in the area where you plan to invest. Is it a buyer’s or a seller’s market? Are home prices going up or down? What are the rental rates in the area? Understanding these factors will help you make an informed decision about whether to invest in a live-in flip.

3. Your timeline

Flipping a house takes time, and you must be prepared for the work involved. If you plan to do most of the renovations yourself, you’ll need to factor in the time it will take to complete the work while still living in the property.

Most people don’t realize that mistakes are easy to make when renovating a house.

You’ll also want to consider how long you plan to live in the property before selling or renting it out.

4. Your skills

If you plan to do most of the work yourself, assessing your skills and experience is important. Do you have the necessary skills to complete the renovations, or will you need to hire contractors? Remember that hiring contractors will increase your costs, which could impact your profits.

5. The property’s potential

Before investing in a live-in flip, you need to assess the property’s potential. Is it located in a desirable area? Does it have good bones? Are there any major repairs needed? You should also consider the amount of work and potential return on investment involved with different property types.

For example, a condo may be less work than a single-family home to flip, but you could be limited on the amount you can make when it’s time to sell or rent it out. You’ll want to look for a property with the potential for appreciation and rental income.

6. Your goals

What are your goals for the live-in flip? Are you looking to make a quick profit or generate long-term rental income? Short-term profit means buying a property, renovating it, and selling it quickly for a profit.

Long-term rental income means buying, renovating, and renting a property to generate ongoing income. Short-term profit goals may be suitable for investors who are looking to make a quick return on their investment, while long-term rental income goals may be better for investors who are looking to generate ongoing passive income.

Understanding your goals will help you determine the best strategy for the property.

7. Finding an agent

Working with a real estate agent can be invaluable when investing in a live-in flip. A knowledgeable agent can help you find properties that meet your criteria and provide guidance throughout the process. Look for an agent with experience in investment properties and house hacking.

8. Commission and fees

When working with a real estate agent, it’s important to understand the commission and fees involved. Typically, the seller pays the commission, but in some cases, the buyer may be responsible for a portion of the commission.

You’ll also want to factor in any closing costs and other fees associated with the purchase. You can also consider buying or selling the property without an agent, but you will want to carefully consider the pros and cons before doing so. 

9. Your exit strategy

Before investing in a live-in flip, you need to have an exit strategy in place. Are you planning to sell the property for a profit? Or will you rent it out for long-term income? Having a clear plan will help you make informed decisions throughout the process.

10. Making money

Ultimately, the goal of a live-in flip is to make money. To ensure a profitable investment, you’ll need to carefully calculate your potential profits and expenses. This includes the cost of renovations, financing, and any ongoing expenses associated with owning the property.

Bottom Line:

Live-in real estate flipping can be a great way to invest in real estate while also having a place to live. However, it’s important to carefully consider your financial situation, the real estate market, your timeline, skills, the property’s potential, your goals, finding an agent, commission, and fees, your exit strategy, and making money.

Considering these factors, you can determine whether a live-in flip is right for you.

Buy-and-hold real estate investing is a strategy for wealth building that does not require a large infusion of cash to get started. With a little bit of research — and a lot of elbow grease — it can be a great way for beginners to start investing their money.

Buy-and-hold real estate investing, also known as the BRRRR method, is a strategy in which investors buy properties in need of rehabilitation, rent them out, and refinance them to repeat the process.

It’s a great way for those new to real estate investing to have greater control over short- and long-term investments.

The Benefits of BRRR

Tax Benefits

A buy-and-hold investment offers tax benefits via a 1031 exchange if you sell a property and invest the proceeds into another like-kind property.

This can be especially profitable if you’re utilizing a 1031 exchange in Florida, a state with few regulations and a white-hot housing market.

Save Money on Property Management

More money will flow back into your pocket if you manage your properties. Some investors may not have the time or expertise to act as property managers, but if you do, it’s a great way to improve your return on investment.

Earn Passive Rental Income

Once you’ve completed the buy-and-hold process, rental income is passive. You’ll need to complete repairs as needed and clean units between tenants, but it can be a low-maintenance way to earn extra income if done correctly.

Utilizing one of the best home rental websites will allow you to quickly and easily find a tenant. This is how you build wealth. Your investments make money for you. 

Investment Appreciation

In addition to passive income, real estate values generally appreciate. In 2021, the average home price rose by nearly 17%. That beats the stock market’s rate of return by 7%.

How To Get Started

There are six steps to a buy-and-hold real estate investment strategy.

Step 1: Work With the Best Realtor

A crucial step is to locate the best property, so you’ll need to start with a great Realtor. You can save money on this step by using an experienced discount broker to save money on commission. 

Step 2: Buy the Right Property

Once you secure a Realtor, you can start looking for the right property. 

• Look for properties that will provide at least a 1% monthly return on investment. For example, if you buy a property for $200,000, your rental income should be at least $2,000 a month. Have your real estate agent perform a comparative market analysis of similar homes that have sold recently in the area to ensure you don’t overpay for a property.
• Avoid condos, properties with homeowners associations, and properties in historic districts. These are typically more challenging for new BRRRR investors and can eat into the bottom line.
• Purchase a “value-add” property. This investment requires a little sweat equity to bring out its true value. If the work’s already been completed, your return on investment will plummet.

Step 3: Be Smart About Remodeling

That “value-add” property is going to need some work. You’ll have to put some money into it upfront, but there are ways to save while you make improvements.

Ensure you always pull permits so there are no building code violations.

1. Use a cash-back credit card. If you spend $100,000 rehabbing and charge it to a 2% cashback card, you’ll save $2,000.
2. Use professionals when you need them and DIY the rest. For repairs, such as electrical and plumbing, that are highly technical or require a licensed contractor, let the professionals handle it. Do it yourself if you’re just refreshing the paint or making small cosmetic repairs. Having reliable contractors can be a godsend.
   

Step 4: Choose Good Tenants

Rental properties are a lot like your children. No one will care for them exactly the same way you do. That said, taking the time to pick the perfect tenants will help you protect your investment. 

• Start with a solid lease agreement. This might require a conversation with a  lawyer, but it’s worth it to draft a document that is clear, specific, and free of loopholes.
• Consider a property manager. This can add anywhere from 8–10% in monthly expenses, but if the property is large — or you don’t have time to do the job — it might be worth the cost.
• Screen tenants carefully. If you choose to manage the property yourself, take time to find excellent tenant screening tools. You’ll want to look specifically for good credit and a rental history free of evictions.
• Be fair. Treat every tenant exactly the same way, regardless of circumstances. You might be tempted to offer benefits and exemptions to some tenants, but resist that temptation. In the end, the BRRRR method is a business, and a consistent approach is best for you and your tenants.

Step 5: Refinance

You’ve bought, rehabbed, and rented your property. Now it’s time to refinance. 

• Choose a lender. Credit unions and small community banks tend to have more favorable rates. Online banks are another resource, often with lower — or zero — closing costs. Don’t forget to compare rates and fees.
• Get an appraisal. This helps you realize the fruits of your labor during the rehabilitation phase.
• Make sure you can cash out. Your lender should be able to offer a new mortgage that’s higher than the original. Cashing out puts money in your pocket for the final step — building your portfolio. 
• Mind the seasoning period. Some lenders require you to keep your first mortgage for a set period of time before refinancing. 

Step 6: Start Looking for a New Property

With your refinancing complete and your cash in hand, it’s time to look for your next property.

Before starting your search, take time to reflect on what worked and what didn’t in your first buy-and-hold real estate investment. There’s no sense in making the same mistake twice.

All the investment books in the world don’t replace experience, so figure out what parts of BRRRR worked for you.

As the world experienced its second year of the COVID-19 pandemic, the virus made its mark on the housing and job markets. In 2021, more than 47 million Americans resigned from their jobs, creating a movement dubbed the Great Resignation.

At the same time, the housing market boomed, driving up home prices with more people looking for homes than selling.

Bidding wars have become the norm and not the exception. Buyers have been forced to do out-of-the-ordinary things like pay cash, waive home inspections, or offer appraisal gap coverage in the event house doesn’t appraise.

To say that real estate markets have been different would be an understatement.

A recent study conducted by Real Estate Witch surveyed 1,000 many Americans who were part of the Great Resignation about why they left their jobs and how their priorities in life have shifted.

As more companies seek to hire or retain employees by allowing them to work from home, workers are growing more accustomed to having flexibility in where they live. Working remotely has become far more commonplace.

A home close to work is no longer a top priority, allowing people to purchase houses in less urbanized areas with lower costs of living.

Let’s take a closer look at the study’s findings, including how the Great Resignation and the housing market are affecting each other.  

A Change in Culture and Lifestyle

Experiencing a once-in-a-lifetime pandemic seems to have shifted the mindset many employees have about their needs in a job and workplace.

The pandemic was at the forefront of employees’ minds as they changed jobs, with 80% of respondents saying it influenced their decision to quit. Of those, 41% said their employers didn’t implement enough health and safety measures and 28% did not want to follow newly established protocols.

Asked to list the main reasons why they left their jobs, the most common answer (31% of respondents) was that workers quit to leave behind toxic work environments that included discrimination, harassment, and a lack of work-life balance.

Early in the pandemic, many jobs shifted to a work-from-home structure. During this time, some employees found they enjoyed working from home because it freed them from stressful workplaces. 

Others enjoyed the extra time that working from home gave them for their personal lives, particularly by cutting down on commuting and after-hours work functions.

The appeal of escaping the office and establishing a better work-life balance has led to increased interest in online jobs that offer more convenience.

With people shifting to work from home, houses are becoming more than a place to live. Homes have to meet more needs, serving as an office, gym, classroom, and more. With the freedom of working from home and the need for more space, many homeowners in 2021 wanted to trade in their smaller homes in more expensive zip codes for larger homes with a lower price per square foot. 

When looking for a home that has multiple functions to meet, it’s important to know how to find a real estate agent who can help you locate properties that fulfill your growing list of needs.

This also became a peak time for real estate investors looking to take advantage of the 1031 exchange and roll over the profits of their investments by buying new properties in places like Texas, which has a lower cost of living than other parts of the country and is in demand for buyers and renters alike. 

Financial Considerations at Stake

With housing prices and inflation on the rise, it may be surprising to find that salary was not the primary consideration for all of the survey respondents.

As they quit their jobs, 80% of employees received a counteroffer from their employer.  

A counteroffer might have persuaded some to stay on board, especially those who did not have a new job already lined up. 

Of the 55% of people who had a job lined up before quitting, 53% left to take a job that had a decrease in salary while 42% reported an increase in pay.

On average, respondents reported an $8,000 annual pay cut, and many said they would’ve taken an even bigger cut to leave their job in exchange for better working conditions or an opportunity to work from home.

For households experiencing a drop in income — either by going from two salaries to one or having an overall reduction — many were looking to trim expenses by moving somewhere with a lower cost of living than their current community.

Employees working from home have more freedom to choose where they live, allowing them to take things like personal and lifestyle goals into account instead of having their options limited to places close to their employer.

As people look to save money when house hunting, it’s important to work with a real estate agent who can not only get you a bargain on your new home but can save you money throughout the process.

One way to do this is by working with a real estate agent who charges a lower commission fee than traditional realtors. While most agents charge 2.5% to 3% of the purchase price, some agents are willing to work for a flat fee or a rate of 1% to 1.5%.

Having commissions set in stone is one of many common real estate myths.

Quick Decisions and Long-term Outcomes

During the height of the housing boom in 2021, homeowners in the process of selling were accepting offers almost as soon as they listed their homes on the market, with buyers making quick decisions to find the home of their dreams. 

Many employees moved equally fast when deciding to leave behind their old workplace. Nearly one in four people resigned after mulling it over for less than a week.

About half of the employees gave one week of notice or less, while one in four gave their employers zero notice, quitting the same day.

Looking back at their decision to quit, respondents had mixed feelings. In their responses, 56% had some regrets about quitting, but 58% also said they wouldn’t return to their old jobs without major improvements. While some were anxious or stressed about leaving their employers, most expressed feelings of relief, happiness, and excitement.

Many people quit on short notice whether they had another job lined up or not. Only 55% of those surveyed had a new job lined up before quitting. However, out of the 1,000 people surveyed who quit in 2021, 35% still do not have jobs. Of that group, 50% of people have been unemployed for at least six months. 

Out of those who quit their job without another gig lined up, 56% said they don’t regret it. 

Of those who left for new jobs, they were 47% more likely to be very satisfied with their new role in comparison to the one they quit. And out of those who quit their jobs for new ones, 44% are considering leaving their new jobs within the next six months.

Where things evolve from here is anyone’s guess but the smart money is trending towards more flexibility on where you work.

When you’re in the market to buy or sell a house, getting an appraisal is one of the most important steps. Whether you’re buying your first home, listing your house on the market, or investing in a property using a 1031 exchange, it’s important to understand what an appraisal is, how it works, and why it matters.

What is an appraisal? 

An appraisal is an evaluation of a home’s value. It is performed by a licensed appraiser who does not represent the buyer, seller, or lender so the results are more reliable for everyone involved.

Appraisals are typically required for homes that are financed or refinanced by a mortgage lender. The purpose of the appraisal is to ensure that the purchase price does not greatly exceed the property’s fair market value. 

Appraisers will use similar comparable sales to determine the market value.

An appraisal isn’t required for homes bought with cash, although the buyer might want one to verify that the price is fair. The house may sell faster if the buyer decides to skip the appraisal.  

What happens during an appraisal? 

An appraiser will inspect a home’s interior and exterior to assess its value. The evaluation includes the size of the lot, the number of square feet, and the number of bedrooms and bathrooms, as well as significant upgrades that have been made to the property.

The appraiser will also consider the home’s proximity to schools, public transportation, stores, restaurants, and other local features that add to its value. 

After the on-site assessment, the appraiser will check similar properties that have sold recently in the same neighborhood to compare how the property should be valued.

What is the difference between an inspection and an appraisal?

The biggest difference between an appraisal and an inspection is their purpose. An appraisal establishes a home’s value, while a home inspection looks for problems that may be of concern to buyers before they purchase a property. 

Problems can include structural damage to the roof and foundation, as well as health concerns, such as mold. An inspector can also provide feedback on the quality of the HVAC systems and major appliances.

If problems arise during an inspection, a buyer can ask the seller to make repairs or reduce the price.

There are no mandatory fixes for a seller after a home inspection, however, if the problems are significant enough they could prevent the seller from getting financing for the property.

How the seller responds may depend on contingencies in the initial offer. Find a real estate agent to help you understand what contingencies should be included before you make or accept an offer. 

Why is an appraisal important?

Appraisals are important to the buyer and the seller. Buyers want to make sure they’re getting a good value, and sellers want to make sure they’re getting the most profit from their investment.

The appraisal also provides peace of mind to lenders. They want to make sure they aren’t loaning more money than the property is worth. Should a home be foreclosed, the bank wants to make sure it will recover its losses.

It’s not uncommon for buyers to receive low appraisals if homeowners are selling their houses in a hot seller’s market. That’s because bidding wars for a limited number of properties may drive home prices beyond their appraised values. 

If the appraisal is lower than the agreed-upon sale price, a lender may not approve the loan. There are a few ways to complete the transaction without losing the property. The buyer can make up the difference by providing a larger down payment or asking the seller to lower the price.

In some cases, neither option may be available. If there is an appraisal contingency clause in the offer, a buyer can withdraw the bid and walk away. 

Property owners might also hire an appraiser if they are considering listing it for sale. This is a particularly useful step for someone who is selling their house for sale by owner and does not have knowledge of the local market. 

Who pays for an appraisal? 

The costs of buying and selling a house add up. If you’re the buyer, you’ll have to pay for the appraisal in most cases. It typically costs between $300–$500. Buyers pay for the appraisal at closing, along with other costs.

How should you prepare for an appraisal? 

Preparing for a real estate appraisal is essential.

Start by reviewing previous appraisals conducted on the property. Take special note of things that caused changes to the home’s value. If you’re selling or refinancing, be sure to take care of any problems before the appraiser arrives to increase your home’s value.

Collect informational documents that can impact your home’s value. These include documents from when you purchased the property and the official land survey, which establishes property size. You should also assemble receipts and work orders from improvements you’ve made on the property.

Just like when you’re listing your home for sale, you want it to look its best for the appraisal. Thoroughly clean, declutter, and make necessary repairs. Add some instant curb appeal by mowing the lawn and trimming the hedges.

House flipping is a wholesale real estate investment strategy in which investors buying a fixer-upper renovate it to sell for profit. Properties can range from single-family homes to condominium units, to entire buildings or groups of buildings.

Unlike other real estate investments, which create profit in the long term, house flipping relies on a quick buy-low, sell-high turnaround strategy to protect the investor’s capital investment. For example, an investor might purchase a distressed home in a hot market, renovate, then sell for profit when the home’s value appreciates and capital improves.

Property flipping looks easy on TV — where full renovations appear to happen over a weekend — though it’s not without its pitfalls and risks. Below, we outline a few common house flipping mistakes, but do your due diligence and thoroughly research house flipping before jumping in with both feet.

Skipping a real estate agent

Many flippers believe enlisting the help of a real estate agent will chip away at a profit margin, but research shows that experienced agents typically sell homes for 6% more than those sold without one. That’s a margin large enough to cover almost any broker’s commission.

A budget-friendly real estate broker is an invaluable resource — someone who can answer questions, offer market advice, pull comparative analyses, help you price the property correctly, and market it when it comes time to sell.

Buying an expensive property

Experts recommend purchasing a property for no more than 70% of the property’s after-repair value (ARV), minus the renovation costs. This buffer ensures you have enough margin to make a profit and the budget to make the repairs and upgrades.

For example, if a property’s ARV is estimated to be $200,000 after putting in $15,000 worth of repairs, your purchase price should be no more than $129,500 ($200,000 – $15,000 × .70 = $129,500).

If you can’t reach that price point with the seller, it’s probably not the right property for you. Particularly if you’re a novice flipper, you don’t want to jeopardize your budget or your ability to maximize your profit.

It’s valuable to remember the 70% rule of thumb is a guideline. Plenty of factors can affect your budget and projected profit margin including market fluctuations, costs of materials, or unexpected renovations. But basing your budget on the cost to renovate the home — versus the home’s future market value — will help to prevent you from overspending on the wrong home and eating up your profits.

Blowing the budget

New flippers tend to grossly underestimate expenses. Don’t “guesstimate” or judge the cost of renovations, upgrades, and repairs on your own.

Instead, consult your real estate agent on which improvements are appropriate for the property and the neighborhood and will therefore get you the most return on your investment. Have an experienced and reliable contractor provide estimates for everything from the cost of labor and materials to appliances and permits.

Regularly refer to a working budget to see if you’re on track or if your spending is spiraling. Don’t forget to factor in the fixed costs — mortgage, insurance, property taxes, and utilities — that you’ll be carrying until you sell the finished flip.

Buying too much of a fixer-upper

Homes with major structural damage are seldom good candidates for flipping as you’re unlikely to recoup your expenses after renovating. And some homes simply need too much work to make them a good investment. Focus on properties in established neighborhoods that need cosmetic updates or renovation on one or two rooms.

If you’re planning to do any of the work yourself, be realistic when it comes to assessing your skills, available time and money, and willingness to do the work. If you’re an experienced DIYer and are confident you can install that backsplash, go for it.

But leave jobs that involve electrical, plumbing or anything else that needs a permit or will have to pass an inspection to the pros. This is not the time to learn how to rewire a home from top to bottom from online tutorials. Selling a home with code violations is a big no-no.

Over improving the property

Tempting though it may be to go all out on new appliances and other upgrades, renovating too much may actually hurt you in the long run. If your property is the most expensive house in the neighborhood, it can make it harder to sell — so keep your improvements commensurate with what the market will bear if you want to sell quickly.

Do a reality check to make sure you’re renovating to the neighborhood, and not to your own personal tastes. So if your flip happens to be in a high-end neighborhood, high-end finishes may be called for. Otherwise, choose durable, middle-of-the-road finishes — neither the cheapest nor the most expensive.

Overpricing when it’s time to sell 

House flippers often make the mistake of pricing the property based on how much money they spent renovating it or how much profit they’d like to make. But buyers only care about market value.

Price the property correctly so that it moves quickly. Overpricing can lead to a home sitting on the market for months. And if it lingers too long, carrying those costs will ultimately eat into your profits.Flipping homes can be enormously profitable and rewarding, but it’s not a part-time hobby. There are significant risks to consider before taking on a fixer-upper. Consider partnering with an experienced flipper who’s willing to mentor and educate you before venturing out on your own.

What economic impact does legal marijuana have on real estate? How does a neighborhood dispensary affect nearby home values? Can savvy property investors take advantage of marijuana-related real estate trends?

When house hunting you may want to add this to your list of considerations or then again maybe it is something you want to avoid.

Whatever the case may be, you will be better equipped to make an informed decision when it comes to marijuana and home prices after reading our guide.

A recent study by Clever Real Estate can answer these questions and perhaps point you to a lucrative investment. 

Legal Marijuana and Home Price Appreciation: Is There a Link?

Researchers at Clever Real Estate analyzed publicly available data from Zillow, the US Census, and other sources to determine any relationship between real estate values, cannabis legalization, local dispensaries, and tax revenue.

Here are some of their findings:

• Real estate values: Between April 2017 and April 2021, home values increased by $17,113 more in states where recreational marijuana is legal than in states where marijuana is illegal or allowed for medical use only. And housing values in states with some form of legal cannabis, whether medicinal or recreational us, increased by $6,338 more than in states without legal marijuana. 
• Local dispensaries: Real estate values increased $22,090 more in cities with recreational dispensaries than in cities where recreational marijuana is legal but dispensaries are not available. And every dispensary in a city added increased home values by an average of $519.
• Tax revenue: The eight states with fully developed marijuana programs earned $2.3 billion in tax revenue in 2020. On average, home values increased by $470 for every $1 million increase in tax revenue.

Why would the availability of recreational cannabis impact property values? It appears to create a virtuous circle — the industry generates new jobs and demand for residential and commercial space, which pushes prices and property tax revenue up.

Marijuana also increases sales tax revenue, which state and local governments use to boost public services and schools. This eventually makes an area more desirable and more expensive. 

How Does Recreational Marijuana Impact Local Economies?

The results of recreational marijuana’s impact on local economies are mixed and depend on the locality. 

Real estate markets with fully operational systems for recreational marijuana use may attract more homebuyers, including marijuana consumers, businesspeople, and employees.

With more marijuana stores opening up, says the Forbes Real Estate Council, “the demand for labor is on the rise, and so is the need for homes. Increased property sales and higher rents will be the most significant payoffs.”

A 2020 University of Oklahoma study concluded that “within states that legalize recreational marijuana use, homes experience a positive valuation shock when a dispensary opens nearby, and that “there is a large positive spillover effect on the housing market following legalization.”

The National Association of Realtors (NAR) conducted its own research and reported similar findings — that “states, where medical and recreational marijuana have been legalized for more than three years, have seen more increases in demand for commercial properties.” In fact, demand for warehouses increased by 42%, storefronts rose by 27%, and land by 21%.

However, the results are not uniform when it comes to residential real estate. In 12% of communities, says the NAR, property values rose after opening a new dispensary nearby. But prices fell in 27% of neighborhoods with new dispensaries.

So although legal marijuana might be a positive development for a state’s economy and overall property values, it might not be great for specific localities — it really depends on a town’s population, culture, political climate, and proximity to other towns that do or do not have dispensaries. 

Are Marijuana Dispensaries the New Trader Joe’s?

Back in 2019, Attom Data Solutions analyzed home prices and trends and concluded that homes flipped near a Trader Joe’s experienced an average gross return of 31% and a 5-year home price appreciation of 33%.

The Forbes Real Estate Council says, “It’s interesting to note that new dispensaries’ impact on housing prices is rather similar to new grocery stores’ impact. A preference for neighborhoods with more dispensaries for convenience could indicate that marijuana stores are increasingly seen as one of the top amenities for some homebuyers.”

When considering the “location, location, location” of a home purchase, it’s probably smart to factor in areas slated for the addition of dispensaries. 

Is There a Downside to Legal Marijuana?

There are varying opinions. A University of Wisconsin study found that Colorado, the first state to legalize recreational marijuana, experienced a sharp increase in housing demand (attributed to marijuana-related employment growth), lower crime rates (because marijuana use was no longer a crime), and “additional amenities located in close proximity to retail conversions.”

However, groups against legal cannabis have brought up potential problems:

• Increased suicide and mental illness
• A rise in traffic deaths
• Spike in drug-related crime
• Reduced teen academic achievement
• Harm to public health

Investigators at the Cato Institute reviewed previous studies and new data and concluded that these fears were largely unfounded. They assert that “we found that the strong claims made by both advocates and critics are substantially overstated and in some cases entirely without support from existing legalizations; mainly, state legalizations have had minor effects.”

Investment Opportunities: States to Consider

If you own income properties in states without legal recreational marijuana, consider trading some for investment property in established cannabis-friendly states or states with cannabis industries that are just getting off the ground.

You might, for instance, effect a 1031 tax-deferred exchange from a property in South Carolina, where marijuana is illegal, to one in Illinois, where marijuana is legal. Keep in mind that commercial properties also surged in value where cannabis is legal — you needn’t stick to residential buildings.

Illinois is surrounded by states that either has not legalized cannabis or have legalized it for medical use only. That creates more potential cannabis-related appreciation than a home right next to a cannabis-friendly state.

Oregon, for instance, has legalized recreational marijuana, but it’s adjacent to several established recreational use states — California, Washington, and Nevada. 

One question you may have when buying property is whether to buy in states that have legalized recreational marijuana but have not yet implemented sales, so they have not yet begun to see the increased sales tax revenue or the addition of industry-related jobs. That’s not a bad idea. Once these states fully develop their cannabis sales, expect home prices to rise faster than they otherwise would. 

Clever looked into five developing cannabis states and reports that, “According to our analysis, these five states (Montana, New Mexico, New York, Virginia, Vermont) would have seen home values increase by an average of $61,343 had they legalized recreational marijuana in 2017.” 

There are 22 states that have legalized marijuana but have not yet deployed sales. Of these, 19 have only legalized medicinal cannabis, while three have legalized all uses. It’s recreational use that drives higher home price appreciation, but even medical use has a positive effect.

Of course, many factors determine the potential return of investment property — but legal cannabis is an important consideration when you’re looking to build or buy an investment property.

How to Sell a Home With Building Code Violations

Do you suspect there may be some building code violations at your home? There are many tasks that need to get done before you sell your house, and making repairs is one of them.

Obvious repairs include checking your roof and fixing water leaks, but some other repairs might not be as apparent — like code violations.

Code violations often occur when homeowners do not take out the proper building permits when doing when making improvements or repairs to their property.

This is one category of fixes that might make your head spin, and it can be daunting to figure out which ones you need to make and which ones can be passed on to the next owner of your home.

The answers will depend on the value of your home and how much it might cost to remedy these code violations.

You’ll also want to have a clear picture of any fines that you might have to pay for not fixing violations and whether or not a buyer will want to take those on.

You definitely want to do your research about possible code violations in your home, before putting it on the market.

Here is an overview of your options for selling a house with code violations, with expert tips from realtors, to help relieve some of the stress involved in the process. 

What Does it Mean if a House Isn’t up to Code?

Building code violations range from simple fixes to major repairs requiring a professional’s expertise. Building codes protect public health, general welfare, and safety with different rules by county, state, and even nationwide, such as with the National Electric Code (NEC), focused on safe electrical design, installation, and inspection of all types of electrical equipment.

This code is frequently updated and that means that even a functional electrical system may not be up to code if it hasn’t been updated during the last few years.

Code violations are not only a problem to address because they can make it more difficult to sell your home, they can also lead to fines.

For example, homeowners can accrue citations, violations, and fines for not cleaning their pool, forgetting to mow the lawn, and generally not maintaining their property following homeowners’ association requirements.

In fact, city fines for code violations can even accumulate by the day, meaning that the expense of fixing code violations could be less than the fines that result from a house that isn’t up to code. 

Remedy The Code Violations Before You Sell

One obvious choice, if you have the financial resources, is to bring your house completely up to code before selling it.

A Realtor can advise you on whether this is the best way to go, making considerations for the market value of your home, the return on investment for making repairs, and the possible cost of fines for not being in compliance with code rules.

Some code violations are definitely worth addressing as they may be relatively easy to fix — like making sure ceiling-mounted smoke alarms are at least 4 inches away from walls and wall-mounted alarms are 4 inches to 12 inches down from the ceiling. However, others may be better left to the next owner, especially if they are going to mean a huge job in terms of time and money.

For example: If you have a piping issue and need to re-plumb your house, that may be a greater expense than you want to take on. A contractor can be a necessary asset to figure out the fixes that are a must. 

Offer Buyers a Credit or a Lower Price to Account for Code Repairs

In the current housing market, sellers are finding buyers lining up for homes because there is not enough supply to keep up with demand. That means it could be easier now to sell a home with code violations.

You may find that buyers are willing to compromise and accept a credit or lower price which takes into consideration code violations. Not every house will fit this scenario, but if the violations are minor repairs, or are relatively easy to fix, you may be able to skip making them before selling.

If you do decide to let the buyer foot the bill for code violation fixes, there is more than one way to come to a compromise. Some sellers might offer buyers a credit at closing, considering the expense to make repairs on the home, as long as the code violations don’t pose a safety or health threat.

What’s key is to let buyers know upfront about all of the code violations that are present in your home, and then lowering the price accordingly — working with your agent and a contractor.

A similar solution is selling your house as-is at a lower price, with buyers knowing that they will need to make repairs. This can be done with a traditional sale, where the buyer finances the purchase with a mortgage, or to a cash buyer, which is a special type of buyer that may not be purchasing a house to live in. 

Sell Your House as-is to a Cash Buyer

If you are trying to sell a house with code violations that affect your home’s livability or that would be cost-prohibitive to fix, you may be better off selling it “as-is” for cash.

Cash buyers are the most likely type of buyer to accept a house “as-is” with code violation fixes. One of the most common categories of cash buyers is iBuyers. iBuyers are institutional investors, national house flippers, or startup ups, which are in the business of purchasing homes directly.

While you are likely to get less for your home with this type of buyer than going the more traditional route of selling your house, if you have a lot of code violations and don’t want to deal with them before selling, this may be the way to go.

A real estate agent can help you figure out how much you might get for your home from a cash buyer vs. a traditional sale.

While a real estate agent is your best source, you can start by doing your research on HomeLight’s Simple Sale Platform, which partners with over 100 nationwide pre-approved iBuyers to connect sellers with cash buyers.

Selling a house as-is to a cash buyer is often faster than a traditional home sale, which is another advantage if you need to move quickly. 

Code violations don’t have to mean a long process before you can sell your home. Depending on the violations you could opt for a quick fix, or pass the repairs on to a buyer.

There are so many variables to consider that it’s wise to research the fixes and the cost to remedy them before making any decisions about how to proceed. Selling a home in bad condition almost always means you’ll net less money so you have to decide if it’s worth it.

The right solution will depend on your specific situation and a real estate agent and contractor can advise you about different options from making the repairs, offering buyers a discount with some repairs still needed, or selling your house as-is.

With more than one option, the key is to consider your timeline and goals for your sale and then weigh how you can make your home sale fit in with them. Selling a house with code violations is definitely possible, with, or without, making all of the repairs ahead of time.