From $9,000 to Dream Home: Unveiling the Power of “Level-Up” Investing in Real Estate

Can you afford your “dream house” right now? The one with the pool and the ocean views, space for the kids to run around, and a huge pantry. The secret nobody will tell you: you CAN afford your dream house right now—or at least you can afford the investment that will get you there. Just ask James Dainard, who took a $175,000 hoarder condo and turned it into what would eventually become his $8,500,000 dream house. You can do the same using his level-up strategy.

James only started with $9,000, which turned into multiple millions over the next fifteen years. He would buy a house, fix it, and trade it up for a better one, repeating this strategy five times until he reached the goal: a 9,000-square-foot luxury home in one of the priciest markets in America, Scottsdale, Arizona.

He made millions of dollars completely tax-free because of this live-in flip strategy that ANYONE can use to massively multiply their wealth and take them to their dream home. And maybe you don’t want an $8,500,000 mansion—that’s fine! It only took James three house flips to get into “dream home territory,” and you can do the same!

Click here to listen on Apple Podcasts.

Listen to the Podcast Here

Dave:
From a 1000 square foot condo to a 9,000 square foot luxury home in just five steps. Today we’re talking about how to add value to your house so you can trade up into the home your family dreams about without having to spend your savings. Hi friends. Dave Meyer here for another episode of the BiggerPockets podcast where we teach you how to achieve financial freedom through real estate. I’ve got James Dainard on the show with me here today, and if you’ve heard James on the show before, you know he’s all about value. Add renovating homes to increase their price and sell them at a profit. But James hasn’t only added value on the thousands of homes. He’s flipped as investment properties during his investing career. He’s also done it on the homes he’s owned and lived in. And you probably hear me say this all the time on the show, but 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?
That’s what James has done and it’s allowed him to make money each time he’s sold his primary home, sometimes making over a million dollars on a single transaction, and he’s used that money to level up from that 1000 square foot condo I mentioned into an amazing 9,000 square 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 a professional home flipper. You don’t need to have a 9,000 square foot home or even an ambition to have that kind of home. You could do this at pretty much any level today. He’s going to tell us how to buy your primary home like an investor. That’s the most important thing. You need to think about the most efficient ways to add value while you’re living in it, and how to leverage the incredible tax benefits live in flips can create. Let’s bring on James. James, welcome back to the show.
James:
Always like being here, and this is actually one of my favorite things to talk about.
Dave:
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.
James:
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.
Dave:
It’s unbelievable.
James:
And 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,
Dave:
You’re obviously 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 residents. But 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 a E, right? Tell us about it.
James:
Yeah, it 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 us their deals and whether they could execute or not, we either will buy it off ’em or we’ll fund them on their entire project and help ’em through that process to create a million dollar home.
Dave:
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 check it out, James. So where can people watch it? They can
James:
Watch it March 1st, 10:00 AM on a and e million dollar zombie flips. Check it out. We have a great time. We’re real flippers so you can see the real action
Dave:
Everyone. Make sure to check that out on a and e million dollar zombie flip. All right, well let’s talk about it because what we’re talking about here today is flipping, but sort of your primary residence. So tell us about how you’ve used your primary residence to build wealth over the course of your career.
James:
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. I typically am paying 40% on my income on everything that I make. And so to be able to make 250,000, two $500,000 tax free, it’s 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 and I’ll 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.
Dave:
You said something that your primary residence could 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 Robert Kiyosaki has said that your house is a liability. It sounds like you disagree. Can you explain why the tax is one thing? But it just seems like there’s sort of a philosophical difference.
James:
A hundred percent disagree with them, and I know they’re smart people, but they’re wrong. And the math will tell you that it’s wrong. So 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 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 that house.
Dave:
It’s unbelievable.
James:
The reason they’re wrong is because if I pay five grand a month for that house as a mortgage, which is a liability, and I could rent it 2,500, well that’s going to cost me about 27, 20 $8,000 a year. That’s $56,000 after two years, but I’m making $180,000 tax free. 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 ’em over and over again.
Dave:
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 those kinds of things. It is a trade off. It’s a choice. 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 and 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 that point in your life and what did you buy?
James:
Okay, so the first house 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, 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 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, 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 his wife out of there. They were going to sell it, and we paid 175,000 for this condo.
Dave:
Pretty good for Bellevue. Thinking about it now,
James:
I wish I maybe would’ve kept it, but it had a purpose to get me into my next house. So we were paying 1 75, we had to put about 50,000 into the renovation with new cabinets, flooring, doors, trim, adding a bathroom, and then it was worth about 3 25 to three 50. This is a long time ago. It’s almost 20 years
Dave:
Ago. Yeah, but still. So you’re looking at a hundred, 125 grand spread there.
James:
So by the time I was done renovating, I had created the $125,000 spread.
Dave:
And were you actually living in it or were you, you bought it as a primary, you’re renting or something and renovating it on the side, and then you moved in.
James:
I was living in someone else’s house hack at the time, renting a room from someone that had bought at my business partner Will. And so once I was renovated, I moved in. And how I could afford 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.
Dave:
I guess just philosophically at that point in your life, maybe this is one of the benefits of starting at 23, but you weren’t trying to buy your dream house. You saw this as an investment, right?
James:
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 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 my goal, was to buy this as my starting point, save money on my rent, and then really start moving down the road.
Dave:
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. You see it as a stepping stone and an option of trading out and constantly moving up. And I know people don’t want to move that much, but when you have this long-term mentality, you have a choice. 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 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?
James:
That one I lived in about two and a half years, and I ended up selling it for $450,000.
Dave:
Oh, damn. That is awesome. I mean, you more than doubled your equity there, huh?
James:
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.
Dave:
I bet the spark went off. You made 200 grand on