How I Turned $9,000 into My Dream Home By "Level-Up" Investing

Summary

BiggerPockets Real Estate Podcast
Episode: "How I Turned $9,000 into My Dream Home By 'Level-Up' Investing"
Release Date: February 28, 2025
Host: Dave Meyer
Guest: James Dainard

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Introduction to Value-Add Investing

In this episode, Dave Meyer welcomes seasoned real estate investor James Dainard to discuss his transformative approach to real estate investing—"live and flip"—which enabled him to turn an initial investment of $9,000 into his dream home. James shares his journey of adding value to properties, leveraging tax benefits, and strategically trading up to higher-value homes without depleting his savings.

Notable Quote:
James Dainard [00:30]: "Your primary home is an investment, and if you agree with me on that, then don't you want to make it the best investment possible?"

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James Dainard’s Investment Journey

James begins by outlining his extensive experience in real estate, having been a full-time investor since 2005 with involvement in over 4,000 flip transactions. He emphasizes that value-add investing isn't limited to professional flippers; anyone can implement these strategies at various investment levels.

Notable Quote:
James Dainard [02:15]: "I've been a full-time real estate investor since 2005. We've now been involved in over 4,000 real estate flip transactions. It's unbelievable."

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The Live-In Flip Strategy

James introduces the concept of live-in flipping, explaining how living in a property while renovating it can yield significant tax benefits. By holding a property for at least two years as a primary residence, investors can exclude up to $500,000 of capital gains (for married couples) or $250,000 (for singles) from taxes.

Notable Quote:
James Dainard [04:11]: "The primary residence is one of the best ways that you can excel in life because you get a tax benefit if you buy a property and you create equity."

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First Deal: From Condos to Equity

James recounts his first investment in 2006—a hoarder condo in Bellevue, Washington. Purchased for $175,000 with an additional $50,000 invested in renovations, he transformed the property into a valuable asset worth approximately $325,000 to $350,000. This deal not only generated substantial equity but also provided the capital to weather the 2008 financial crisis.

Notable Quote:
James Dainard [08:54]: "By the time I was done renovating, I had created a $125,000 spread."

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Overcoming Market Challenges

The 2008 financial crisis posed significant challenges, limiting access to loans and slowing the real estate market. However, the equity from the first flip provided James with the necessary funds to continue investing. He highlights the importance of flexibility—such as moving into rentals temporarily—to sustain investment momentum during downturns.

Notable Quote:
James Dainard [12:04]: "The live-in flip, at least that I know, is really the only way that you can get that tax-free equity boost and then have the luxury of deciding when and where you want to invest it."

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Second Deal: The Ugliest House Transformation

Determined to scale up, James acquired a distressed, bank-owned property priced at $235,000. Despite its unappealing aesthetics, strategic renovations transformed it into a million-dollar home, achieving a $500,000 tax-free profit. This success underscored the power of disciplined reinvestment and creative problem-solving in real estate.

Notable Quote:
James Dainard [18:21]: "We put about $200 grand into the property. And then after the market kind of rebounded, we sold it for $1 million and made $500,000 tax-free."

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Scaling Up: From Million-Dollar Homes to Luxury Estates

Building on his initial successes, James continued to apply the live-in flip strategy, each time reinvesting the tax-free gains into increasingly valuable properties. By carefully selecting properties below replacement cost and managing renovations efficiently, he was able to compound his wealth significantly.

Notable Quote:
James Dainard [25:06]: "We were able to move into this house the day we bought it, which we've never been able to do. For everyone listening, I never thought I'd be buying a house like this."

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Achieving the Dream Home

After multiple successful flips, James and his family finally purchased their dream home in Arcadia, Scottsdale—a sprawling 9,000 square-foot residence on an acre of land. This culmination of strategic investments and disciplined financial management showcases the potential of live-in flipping as a pathway to substantial wealth accumulation.

Notable Quote:
James Dainard [35:08]: "We are finally in her dream house. No way I would ever be able to do this house if we didn't go through these steps and create this equity and gain."

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Key Takeaways and Tips for Aspiring Investors

James offers pragmatic advice for newcomers to real estate investing:

1. Start Small and Be Flexible: Begin with manageable projects to build experience and equity.
2. Focus on Value-Add Opportunities: Seek properties where you can create significant value through renovations.
3. Leverage Tax Benefits: Utilize live-in flip strategies to maximize tax-free gains.
4. Network with Contractors: Building relationships with reliable contractors is crucial for successful renovations.
5. Stay Disciplined: Reinvest profits wisely and avoid over-leveraging to maintain financial stability.

Notable Quote:
James Dainard [38:50]: "Be less picky and chase the best value because it's temporary. You have to find those contractors to bring out and work on your project. The puzzle is always solvable."

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Conclusion

James Dainard's journey from a single condo investment to owning a multi-million-dollar dream home exemplifies the effectiveness of live-in flipping in real estate investing. By strategically adding value, leveraging tax benefits, and maintaining disciplined reinvestment, James has successfully built substantial wealth over two decades. His story serves as an inspiring blueprint for both novice and experienced investors aiming to achieve financial freedom through real estate.

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Additional Resources Mentioned:

• Million Dollar Zombie Flips on A&E: James's new TV show premiered on March 1st, showcasing his team's efforts to transform distressed properties into luxury homes.
  Watch It Here: Million Dollar Zombie Flips on A&E (Note: Insert actual link if available)

• Resimply CRM: An all-in-one CRM tool for real estate investors.
  Learn More: resimpli.com/biggerpockets

• Rent Ready: Tenant screening and income verification service included with BiggerPockets Pro membership.
  Get Started: rentready.com
  Promo Code: BPINVESTOR for six months at $1

• Rent to Retirement: Offers turnkey investment properties with low down payments and competitive interest rates.
  Contact: Text REI to 33777 or visit biggerpockets.com/retirement

• PPR Capital Management: Private real estate fund for accredited investors seeking passive income.
  Explore Opportunities: biggerpockets.com/PPR

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Final Thoughts:

James Dainard's approach demonstrates that with strategic planning, disciplined investing, and the right mindset, real estate can be a powerful vehicle for building lasting wealth. Whether you're a seasoned investor or just starting, the live-in flip strategy offers a viable pathway to achieving your financial and personal dreams.

Transcript

[Dave Meyer]

From a 1,000 square foot condo to a 9,000 square foot luxury home in just five steps. Today we're talking about how to add.

[James Dainard]

Value to your house so you can.

[Dave Meyer]

Trade up into the home your family dreams about without having to spend your savings. Hi, friends, Dave Meyer here for another.

[James Dainard]

Episode of the BiggerPockets podcast where we.

[Dave Meyer]

Teach you how to achieve financial freedom.

[James Dainard]

Through real estate estate.

[Dave Meyer]

I've got James Dainard on the show with me here today.

[James Dainard]

And if you've heard James on the show before, you know he's all about value add.

[Dave Meyer]

Renovating homes to increase their price and.

[James Dainard]

Sell them at a profit. But James hasn't only added value on.

[Dave Meyer]

The thousands of homes he's flipped as.

[James Dainard]

Investment properties during his investing career. He's also done it on the homes he's owned and lived in.

[Dave Meyer]

And you probably hear me say this.

[James Dainard]

All the time on the show, but.

[Dave Meyer]

Your primary home is an investment and if you agree with me on that, then don't you want to make it.

[James Dainard]

The best investment possible? That's what James has done and it's.

[Dave Meyer]

Allowed him to make money each time.

[James Dainard]

He'S sold his primary home, sometimes making.

[Dave Meyer]

Over a million dollars on a single transaction. And he's used that money to level.

[James Dainard]

Up from that 1000 square foot condo.

[Dave Meyer]

I mentioned into an amazing 9000 square.

[James Dainard]

Foot home he lives in right now. It only took him 15 years and if you want to check it out, you should go look at his Instagram. It's pretty crazy, but I wanted to have James on the show because let's be honest, you don't need to be.

[Dave Meyer]

A professional home flipper. You don't need to have a 9,000 square foot home or even an ambition.

[James Dainard]

To have that kind of home.

[Dave Meyer]

You could do this at pretty much any level.

[James Dainard]

Today he's going to tell us how.

[Dave Meyer]

To buy your primary home.

[James Dainard]

Like an investor, that's the most important thing you need to think about the most efficient ways to add value while.

[Dave Meyer]

You'Re living in it and how to.

[James Dainard]

Leverage the incredible tax benefits like Live in Flips can create. Let's bring on James. James, welcome back to the show.

Always like being here and this is actually one of my favorite things to talk about.

I love this topic. You put out such a cool social media post about this and I was eager to just have you on to explain it. You've been on the show a million times, of course, but maybe for people who don't know you, just give us a little bit of background about your history as an investor.

So I'VE been a full time real estate investor since 2005. We've now been involved in over 4,000 real estate flip transactions.

It's unbelievable.

And you know, typically we're running 20, 30 flips at a time. We're building homes. Anything that we can get a deal on and we can create value on, we are all over. So from apartments to flips to development.

You'Re obviously like truly one of the best flippers in the entire world. And we're excited to have you on to tell us a little bit about how you've done that with your primary residence. But I, I also wanted to give you a shout out, man, if it's cool that we talk about it, that you are being recognized and now have a flipping TV show on AE, right? Tell us about it.

Yeah, it comes out March 1st on a and E. It's Million Dollar Zombie Flips where me and my team, we are out there looking for the worst of the worst and creating luxury million dollar houses. And the cool thing is we featured a lot of brand new investors that would pitch pitch us their deals and whether they could execute or not, we either will buy it off them or we'll fund them on their entire project and help them through that process to create a million dollar home.

Oh cool. Awesome. What a great concept. And if you haven't met James or know his team, they're also awesome. So this is going to be a very fun project. A great group of people super excited to, to check it out. James.

[Dave Meyer]

So where can people watch it?

[James Dainard]

They can watch it. March 1, 10am on A N E Million Dollar Zombie Flips. Check it out. We have a great time. We're real flippers so you get to see the real action.

Everyone make sure to check that out on A and E. Million Dollar Zombie Flip. All right, well, let's talk about it because you know what we're talking about here today is flipping, but sort of your primary residence. So you know, tell us about how you've used your primary residence to build wealth over the course of your career.

The primary residence is one of the best ways that you can excel in life because you get a tax benefit if you buy a property and you create equity or you gain equity to where if you're married after two years you can sell your house and take the first $500,000 in equity gain tax free. And if you're single you can make $250,000 tax free. And as a flipper we are very taxed. You know, I typically am paying 40% on my income, on everything that I make. And so to be able to make 250,000 to $500,000 tax free is a huge benefit because it allows you to trade up with the extra money that you're making. And so we've now done this. We are on our sixth house.

Wow.

And I will say the house that we bought, I never thought I'd be living in. And it's all because of the live and flip process.

You said something that your primary residence can be one of the best investments that you make. But there are a lot of very famous, very prominent real estate investors and real estate investor educators who say the opposite. Right. You hear Grant Cardone saying that your house is not an investment. I know. You know, Robert Kiyosaki has said that your house is a liability. It sounds like you disagree. Can you explain why? Like, the tax is one thing, but like, it just seems like there's sort of a philosophical difference.

100% disagree with them. And I know they're smart people, but they're wrong. And the math will tell you that it's wrong. Right. So, like, for example, their whole premise is that you can rent a lot cheaper than own and then take that money and invest it elsewhere. So let's say on a house, I could buy a house with my process, which is to buy it, fix it up, and create equity, and then sell it in two years, tax free. If I'm selling a property and I'm making $500,000 tax free, that means I'm saving close to $180,000 in taxes on the house.

It's unbelievable.

The reason they're wrong.

Yeah.

Is because if I pay five grand a month for that house as a mortgage, which is a liability, and I could rent it 2500, well, that's going to cost me about 27, $28,000 a year. That's $56,000 after two years, but I'm making $180,000 tax free.

Yeah.

So they're just wrong on this. If you're going out and buying turnkey, they have a little bit of an argument there, like, hey, can you invest it still? Invest in assets, have a lower liability. That makes sense. But if you can create that equity, they are wrong. And I will prove it to them over and over again.

Yeah, I agree. I think that it's a spectrum. Right. They're probably correct. If you're going out and stretching and buying the dream house turnkey, buying new construction and moving in and, you know, like those kinds of things, it is A trade off. It's a choice. Like you can make your primary residence a good investment if you want to prioritize that. Some people don't. Some people just want to buy their dream house. But if you're listening to this podcast, I'm guessing you want to turn a profit on every real estate transaction that you do. And I a hundred percent agree with James. Whether you're house hacking or doing a live in flip, you can absolutely make your primary residence a good investment. And we've talked a ton on the show about house hacking, so I'm eager to hear from you. Just sort of the nuts and bolts and logistics of how you've done the live and flip model six different times now to build wealth. Can we just start at the first deal and you tell us where were you at at that point in your life and what did you buy?

Okay. So the first house that, that started the whole process. I was actually single then too. I wasn't married, so I didn't have up to 500,000 I could gain. I bought the property in 2006. I was 23 years old. I was working in real estate. And the issue I was having is I didn't qualify for a big mortgage. I couldn't buy a lot of expensive things because of my income and what I was making. And so what I ended up buying was a condo in Bellevue in Washington, which was a hoarder condo. And it was packed, it was nasty, it needed a ton of work. But I was able to buy this property from a seller because he was moving in his wife out of there. They were going to sell it, and we paid 175,000 for this condo.

Pretty good for Bellevue. Thinking about it now, I wish maybe.

Would have kept it, but it had a purpose to get me into my next house.

Yeah, right.

So, you know, we were paying 175. We had to put about 50,000 into the renovation.

Okay.

With new cabinets, flooring, doors, trim, adding a bathroom, and then it was worth about 325 to 350. You know, that's a long time ago. It's almost 20 years ago.

Yeah, but still. So you're looking at 100, 100 and 25 grand spread there.

Yeah. So by the time I was done renovating, I had created the $125,000 spread.

And were you actually living in it or were you sort of like you bought it as a primary, you're renting or something and renovating it on the side and then you moved in?

I was living in someone else's house hack at the time, renting a room from someone that had bought it. My business partner will. And so once I was renovated, I moved in. And how I could afford it was. It was a house hack too, because I rented out a room for 750 bucks a month. It covered half my mortgage. And I was doing pretty well because I'd made over $125,000 in equity and I was paying the same as what I was paying for that room down the road. So it made a big first impact. But then with the market appreciation, it created more equity.

I guess just philosophically, at that point in your life, maybe there's. This is one of the benefits of, of starting at 23. Right. But like, you weren't trying to buy your dream house. You saw this as an investment, right?

Yes, I wanted to own my own property and so I had to work with what I had to afford. But even back then I was like, I want to live on the water one day randomly. I live in the desert now. But, but that was my goal. I was like, I want to get to a waterfront house. But there was no way I was ever going to be able to afford that. And so that was kind of my goal was to buy this as my starting point, save money on my rent, and then really start moving down the road.

Well, that's awesome. I mean, I think that's such an important thing here because having that sort of long term dream and plan makes it kind of fun, right? Like you see as like a stepping stone and an option of like trading out and constantly moving up. And I know people don't want to move that much, but like, when you have this long term mentality, you have a choice, right? You could look at a property on the water and be like, I'm never going to be able to afford that. Or just kind of dream like, oh, one day I'll get there. Or you can sort of like back into how many times you need to do this live and flip concept to get there. That's super cool. So did you live in it for exactly two years or how long did you stay that one?

I lived in about two and a half years and I ended up selling it for $450,000.

Oh, damn, that is awesome. I mean, you more than doubled your equity there, huh?

Yes, we more than doubled the equity. And then that's where the spark went off. I was like, okay, wow, I got to use this now.

I bet the spark went off. You made 200 grand on your first 11 plus pretty good deal.

Now, kind of what happened from there? I had saved the money, it was tax free. And that was really also what got me through 2008. Because then 2008 happened and everything started getting wiped out, including me. You know, by 2007 we were actually making money. I had this money I could trade into a new house. I was looking for my next house. But then the wheels came off and we definitely were not making money for 12 to 18 months. And that became the next problem. It was hard to get a loan and it was hard to make any kind of money in real estate from 2008 to 2009.

Yeah.

The only thing that saved me was that equity that I'd made because it allowed me to look for that next property. And the key to this is every time you do it, there's a little bit of sacrifice involved.

Right.

Because you have to find the property that can create you equity, not your dream house. Because what I did know is after selling that condo, I still couldn't afford my dream house.

So you mentioned something that's really important here, James, because I think when a lot of people think about flipping or buying and selling property is like, oh, I'll just do a 1031 exchange. But you mentioned one of the benefits here of live and flip that really isn't available in other parts of real estate, which is that you were able to sell that, get that money tax free and then sit on it. You didn't have to reinvest it right away, which is how a 1031 exchange works. Like you have to close within 180 days and you have to identify the properties much quicker than that. And so the live in flip, at least that I know, is really the only way that you can get that tax free equity boost and then have the luxury of deciding when and where you want to invest it. And this is a perfect example. Like the market changed. James wasn't ready to reinvest into another primary residence. So what'd you do? Did you rent for a little while and then buy a new house a couple of years later when you're in a better financial position?

Yeah, I ended up moving into a rental and I've done that twice throughout this 20 years where I sold the property. I didn't have what I wanted to trade up into and I just moved into a rental. I sat on it until I found the next property that I could buy. And so it kind of timed out well because I was able to kind of make it through the hard times, but then have that money sitting there. The negative thing is I kind of got wiped out. The market was tough, couldn't make money, but then properties were a lot cheaper and it was allowing me to then reinvest into something else. So I rented and then I was on the hunt for my next property and the next property I found was probably the ugliest home I've ever bought.

We do have to take a quick.

[Dave Meyer]

Break, but first wanted to say that.

[James Dainard]

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[James Dainard]

Podcast with James D. Talking about how he has live and flipped his way to his dream house. We talked about his first deal before the break and before we left. James hinted that the second house was the ugliest house he ever bought. Please tell us about this.

You know as your life changes, your lifestyle changes and I had just gotten engaged with my now wife and we were looking at settling down, having some kids. So I Had to find a much bigger property. Now the problem was I didn't have the money to go buy a bigger property. Couldn't afford that monthly payment. I had some cash on the sidelines because that first condo I had to put maybe $8,000 down. I grew into over $200,000 that I now had to reinvest tax free. But for what we were trying to do, that was going to take up all my money and I wasn't going to still be able to afford that payment. So then I targeted the cheapest, ugliest thing I could find. And it was a bank owned property. And it literally looked like someone glued three shoe boxes together.

Wait, when there's one house or triplex?

It was a house, but someone had taken this like kind of 1950s row house. Then they added a section, they converted the garage, added a weird garage thing off the back. I remember taking my wife there. I'm like, I found a house that could work for us. It's in the right location, it's the right size and has a big yard. Had a half acre lot. And I took her there and she's like, are you kidding me? This is where you want to grow a family? And so I kind of talked to her about the monthly payment, what we had to do. And it was either we had to live way further away or if we wanted to be where we were going to be, this is really all we could afford with that down payment. And so we ended up purchasing that property using that money that we made tax free as our down payment. And we were able to get a construction loan on the property to where we could then take this property that we paid $235,000 for. This was something on market anybody could have bought. It was for sale for six months. That's how ugly it was. We put about 200 grand into the property. And then after the market kind of rebounded, we sold it for $1 million and made $500,000 tax free.

Oh, my God. Okay, so let's just go through those numbers again. So you bought it for 235.

You said 235.

And did you put 20% down, do you remember?

No, I had to put more down back then because the market was still risky. And so I had to put 25% down. It was the purchase price plus fix up. So it was like around a $500,000 loan. So I put down 125. But then I had to have money to be able to hold the property as we were repairing it.

Oh, Right.

And so I barely had enough to pull this off. And that's why I was really trying to get this one done. And it took some convincing my wife, but it was all because I did done that first live in flip.

You had enough money, right? Because you said you cleared like 200 grand on that first one.

Yes, I barely had enough money. I had to get it renovated a certain amount of time or I would have been burning. I had to rent during that time too. We couldn't move in.

Oh, yeah. So you're double expenses.

Double expenses. I have a funny story about that. When I made the next trade because I couldn't afford both. So I went into my mom's basement. But it made a huge difference having that capital because over two years we went from making 250 on the first one to the second one. We made $500,000 tax free when we sold it.

So your wife was probably pretty happy after that, I would imagine, despite living in the ugly house.

You know what? But we made it beautiful. I definitely learned a lot about construction from that house alone. And it became a million dollar property. And at that point in my life, I never thought I'd own anything that was worth a million bucks. Not when I bought that condo.

Right, right.

Like I bought that condo and you're making a million dollars. You got to be rich to buy that. And what I realized is you don't have to be rich. You just have to put the puzzle together.

So. Well, I want to hear about the rest of these deals, but I just want to ask for like normal people who haven't done 4,000 flips. Like, is the scope of what you did in these projects, things that regular or newer investors could pull off.

I had never flipped a property ever when I bought that condo. Right. You know, and that's why I started with something a little simpler. But it was still gross, but it was manageable. And, you know, you have to do what you have to do. Like on that property, I remember I was painting some walls. I was helping take the garbage out when I bought it. You do what you need to do to get into that first property. The second one, I had only flipped maybe 60 houses before this and never have wanted this size.

Okay.

So it was about finding the right contractor. And it took me a long time. I had to meet like 10 different contractors. I found the guy and we had to be thrifty though, to get it done for that price too. I was out like looking at every clearance shop, whatever I could get a deal on. You Know, so you have to scrap your way in to that equity position. But it is doable.

Absolutely. I love how you say just 60 flips. That would be like a career for most people, but. But for you, 60 flips is modest.

But, you know, a lot of those flips were very easy back then too. Like, I had never done one like this. That second one, yeah, this was. This is what I can afford. I can swing. And I got to figure it out. It was definitely a tough, challenging project.

So I imagine, you know, you made 500 grand off this. You're probably thinking, I just got married. Now is it time to buy a dream house? Or what'd you do after this?

And this is where I did get into a dream house scenario.

Nice. You deserve it.

My wife actually was like, I really want this property. I'm like, honestly, I didn't really want to sell that house because I'm like, we have all this equity. My mortgage payment on that house was $1,800 a month.

Unbelievable.

I'm like, we could just stay here forever. We're fine.

Yeah.

But what we were able to do with that 500 grand is then we ended up buying our house in bridal trails, where we paid $890,000 for a 5,000 square foot house that was completely dated and had been overrun. And, you know, there was kind of two things you could do on that property. You could do more cosmetic, but then you weren't going to create that 500,000 or you could go full mill deal on the thing. And so we paid 890,000, and then we invested $1 million into this renovation.

Wow.

This was my dream house, though. It was a northwest contemporary, beautiful home. I hired an awesome architect and it was amazing. We had kids at this point. This is where it got a little tricky, though, because we went for another big jump. And this was beautiful properties. Bellevue, Washington acre lot. I wanted privacy. I wanted a big yard for my kids to play and have kids over. But that was stretching us at the time because again, my mortgage payment was $1,800 a month. And now I was buying this property that I had to fix up for nine months. And so what we did there to afford it, and this is the conversation I had. My wife was like, hey, we can do this. But we got to cut our monthly cost down. So we ended up moving in to my mom's basement while we renovated this with a 2 year old and a brand new baby.

How big of a basement was it?

Uh, it was, you know, it was. It was like 900 square feet. So we were good, but it was rough. You know, it was tough time. But, you know, for us to get us to this next level house, we had to make some sacrifices because they ate up all of our cash that we had made from our previous two houses. And we had to still make that payment while we were renovating it. But once we were done renovating it, it turned into a value of 3.25 million.

What? What? You put in a million? So it was 1.8, 1.9 in.

Yes. And I ended up selling that house three years later for 3.25 million.

Okay, so if I'm keeping track so far, you started with. I forget exactly what it was in equity. It was like 100 grand. And then you doubled it. More than doubled it the second time around. And now this time, you. You doubled it again.

Yes. So on those three houses, we were able to make 1.25 million. Tax free.

[Dave Meyer]

Tax free.

[James Dainard]

Oh, that's amazing.

And that's why Grant Cardone is wrong.

I love that. Yes. I mean, yeah, you got 1.2 million reasons why Grant Cardone is wrong there. It's an unbelievable amount of money. Cool. So, I mean, at that point, I, you know, would probably relax, enjoy the amazing house that I was living in and all this money that I made. But it sounds like you kept going, so why were you just addicted at this point? Because you were just making so much money every time we did it.

Yeah, I kind of was. Because, you know, part of it was like, we would make this money, but also, you know, we were able to reinvest some of that money into hard money, which now pays us interest. And so when we sold the house, we ended up not buying another house for about 18 months.

Okay.

Because we had taken that $1.25 million and put it into hard money. It was paying us $12,000 a month in interest.

Oh, my God. Wow. And so you're just renting.

We were just renting, living a good lifestyle, kind of splitting our times in different states, and we were trying to figure out where we want to be. And so I ended up buying another house about 18 months later, and I traded down. It was a property in Bellevue. The reason I bought it was not the location I really wanted to be, but it had great views, could be renovated, and the value could be increased. And so I ended up paying 1.7 for that property. I put in 700 into the renovation, and then we ended up selling that one for 3.7 million.

Oh, my God.

And part of that was the pandemic pumped value up on that house. We were targeting the 500 grand. It just went up higher because of the pandemic like everybody else.

Well, that's unbelievable. And I mean it's just another example of why the live in flip is so valuable over the 1031. Because yes, the timing that I talked about earlier where you can take the money out and sort of be opportunistic, which it sounds like you did again. But the other thing is you don't have to reinvest 100% of your profit, right. Like you, you traded down so you're able to take all that profit you made off the third one, still do this again and take some money off the table and invest it into another asset class. Like that's unbelievable to be able to do that. And you're not only are you getting.

[Dave Meyer]

Your primary residence, you're diversifying at the same time.

[James Dainard]

So I want to hear more about what you did next, James, but we do have to take a quick break. Break. Before we go, I just wanted to say that if you need a financial planner who can help you get all the amazing tax benefits like James and I are talking about, we can help you find one on BiggerPockets. Just go to biggerpockets.com taxpros to get.

[Dave Meyer]

Matched with a tax professional or financial.

[James Dainard]

Planner in your area.

[Dave Meyer]

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[James Dainard]

Welcome Back to the BiggerPockets podcast here.

[Dave Meyer]

With James Dainard talking about how he.

[James Dainard]

Live and flipped his way to enormous wealth. As we are learning here, James is telling us an incredible story. When we left off, James, you had flown flipped a property in Bellevue during the pandemic. How much did you say you walked away from with that?

Over a million dollars on that house in profit.

So you had two in a row that were over a million dollars in profit, though?

Yes. And part of that was we didn't go for our dream house. We went for the best possible deal we could find.

But I imagine like at that price point, like, you're still in a nice house, right?

Yeah, it's a great house. You know, we ended up selling that, the one in Bellevue, after we had, you know, taken them the time off. The reason I liked that deal better wasn't we didn't go to the most expensive because we didn't know what our dream home was yet. So I'm trying to build up more and more cash so we can go buy that dream home. And so the, the great thing about that property Is we paid 1.7 for it. We had gained over 1.25 million in tax free gain, not counting the other gain we had made. And so I was able to put 400 grand down, but I still had about $650,000 remaining, which was in hard money, which was paying me $6,500 a month. So now we bought this property, we renovated it, and my entire mortgage was being paid by my hard money.

That's so cool.

And so that tax free gain allowed me to reinvest and pay myself and reinvest into a property I could create another $500,000 spread in.

So yeah, it's not just paying the equity gain, but it's also giving you the cash flow to play your mortgage. So you're basically living for free.

Well, yes, and, and that's a hard spot to leave, you know, for us. As lifestyle, as we grew, we decided we want to be somewhere a little bit sunnier. And we ended up then buying into a Newport beach property. But that one we ended up pulling the eject card on and just flipping it, but able to take all the money that we had made tax free and invest it into a very big flip. We were thinking about moving into it and then we were going to create the same equity gain, but instead we were able to afford this luxury flip that made us a crazy amount of money.

Tell us about this one. I know. This one just happened, right? You just sold this.

This one just happened. And again, this wasn't the live in flip, but the money that we made tax free allowed us to buy this property. So we paid 5.6 million for this house in Newport Beach. We invested 1.2 million into it, and we sold it for $8.5 million.

Wait, so you put 6.8 in and you sold it for 8. 5.

8 5.

So you cleared 1.7 and 1 not.

There's cost and money and sale costs on there. Yeah, it was 1.2 ish in there.

Yeah. Okay. Wow. Is that your biggest? I mean, it sounds like you've done that more than once, but that had to be one of your biggest flips, right?

Oh, that is the biggest flip I'd.

Ever done by far in one deal.

One deal. And you know, we didn't have the cash to buy something like that either. Right, right. That's the thing. Just because you make more money tax free doesn't mean you go spend it. We were really disciplined about rabbit hole in that away. Either keeping it hard money or reinvesting another asset we could grow with construction. And that one in Newport beach wasn't a tax free sale because we never moved into it. But it gave us the money then to buy our next house, which was in Arizona, which is definitely my wife's dream house. And I can tell you there's no way I would ever be able to do this house if we didn't go through these steps and create this equity and gain.

So that's where you're sitting right now. You are finally in your dream house right now. Or at least your wife's dream house.

Yes, we are finally in her dream house.

All right, tell us about it. Because you just moved in, right, not long ago.

Yeah, we moved in in August. And so now I commute. I fly up to Seattle almost every week for work and I come back and we live here. And it's in Arcadia, which is a neighborhood in Scottsdale. It's a beautiful house. It's 9,000 square feet on an acre. And now my kids are 10 out of 12 I can't keep moving them. We have to. This will be the last time I do this until they're out of high school.

Yeah, that makes sense.

And I barely made it in the nick of time to get it there because we wanted them to be rooted in elementary school. And so we weren't chasing the best deal here, but I did still buy it below replacement costs.

But obviously you still got to go deal.

Yes. I can't not do it. But we were able to move into this house the day we bought it, which we've never been able to do. And for everyone listening, I never thought I'd be buying a house like this. I bought a condo to try to buy a nicer house, and then I bought a nicer house and I traded for a nicer house. And this is the impact. And so I'm so passionate about this. This fulfilled dreams that we never thought we were going to get. And we paid 8.5 million for this house. We were able to put a large down payment down so we're not over leveraged to where it still makes sense. And then over time, if we invest about, I would say, 7, 800 grand into this property, there's a recent sell that just sold for 13 million.

Wow. Oh, my God. Okay, so still got a really good deal here.

It is. Yes. It just needs a little bit of a facelift, you know, and it might be more like a million over time, but now we're not in a hurry either. Like there's no two year clock. And so, you know, that's the beautiful thing about this, that tax savings is a real thing. I mean, we went from a $9,000 down payment into a 3 million to $4 million down payment by just sacrificing and moving things around.

Unbelievable. It's so cool. Like you said, I mean, I'm sure 20 years ago when you started doing this, you couldn't imagine like being in an $8 million home. But it's the power of, you know, persistence in doing it and showing that real estate is just a long game. Right. You just keep doing it over a long enough time, those, those gains are going to compound, especially if you don't lose it to taxes. If you can compound more and more money like the, the math is just incredibly beneficial.

Yeah. And granted we didn't need 9,000 square feet. That's ridiculous. It is. But the reason we kind of went towards this one is a, it was my wife's dream house and that's what I really always wanted to accomplish. But also it was the best value that I could find for this kind of house because the size and the price we paid, we were able to buy it below replacement cost. And so I could have bought a cheaper house that was a little bit smaller, but I would have been paying $300 more a square foot. And so again, I still went with that mindset of I need to buy value. And anytime you buy value, that's how you create value in your life.

Yeah, absolutely. Well, well said and congratulations, man. This is a super cool story and I really think something that people can do, like I'm learning because I'm doing my first live in flip, that this is, can be, you know, a real jumping off point for me. And it is, you know, I talked to my wife about it as well. Like this isn't our going to be our dream house, but it's going to be a super nice place to live and we're going to use it to catapult us into the next deal and maybe the next deal after that. And when you're in real estate, like, you know, I used to think like I'd buy one house and never move, but like it's kind of fun when you are interested in real estate and construction and these kinds of things. Like, I think it's kind of enjoyable. Before we go, James, though, I want to ask like, do you have any tips for people who are not familiar with flipping but want to strike some balance between like having a good place to live but also being able to generate a huge roi? Like you have any, any thoughts or tips there?

The first one is the one that gets you going and so be less picky and chase the best value because like you just said, it's temporary. This is a two year commitment. Then also you have to find those contractors to bring out and work on your project. The puzzle is always solvable. That's the one thing I've learned in real estate investing. No matter if the market goes up and down, you got to look at that puzzle. How do you solve it? And there's always a way to profit, but you might have to look at a lot different than what everyone else is looking at.

Well, James, thanks so much for coming on and sharing your personal story. It's great to hear all the success you've had and that you've finally landed in your dream house after 20 years of hard work and a lot of successful deals.

Put in the work guys. Hard work works guys.

This is why A gave him a TV show because he knows what he's doing to go check out Million Dollar Zombie Flips A and e comes out March 1st. Congrats on that as well.

Thanks, Dave.

All right, and thank you all so much for listening to this episode of the BiggerPockets podcast. We'll see you all soon.

[Dave Meyer]

Thank you all for listening to the Bigger Pockets Real Estate Podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday and Friday. I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian K, copywriting is by Calico, content and editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter, please visit www.biggerpockets.com. the content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any asset, real estate included, involves risk, so use your best judgment and consult with qualified advisors before investing. You should only risk capital you can afford to lose. And remember, past performance is not indicative of future results. Biggerpockets LLC disclaims all liability for direct, indirect, consequential or other damages arising from a reliance on information presented in this podcast.