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In a major …
23. December 2024
Dion McNeeley, a seasoned real estate investor, has cracked the code on achieving financial independence through a unique strategy he calls the ’live-in BRRRR’ method. By leveraging the IRS Section 121 Exclusion, which allows taxpayers to exclude up to $250,000 of gain from the sale of their primary residence, McNeeley aims to sidestep capital gains tax and shield himself from up to $250,000 in profit.
McNeeley’s journey began with a buy-and-hold strategy, carefully building a portfolio of rental properties throughout Washington State. He spent over a decade accumulating wealth, eventually quitting his day job in 2022 and retiring in his early 50s. With a 16-unit portfolio generating enough rental income to sustain his lifestyle, McNeeley was free to explore new investment opportunities.
In 2023, he decided to experiment with the BRRRR method, purchasing a distressed duplex outside Seattle. By focusing on properties with low days on market, McNeeley identified a beat-up duplex that had been on the market for over 100 days and was listed for $500,000. After negotiating a deal, he purchased the property in cash and moved in, dedicating himself to renovating the unit.
Over the next 10 months, McNeeley poured $62,000 into renovations, transforming the duplex from a “completely destroyed” state to a livable property. He then found a tenant for the second unit, generating rental income that more than covered his expenses. By buying in cash and avoiding financing, McNeeley sidestepped the higher interest rates associated with traditional lending.
The ’live-in BRRRR’ has been lucrative for McNeeley, allowing him to earn rental income without incurring mortgage payments. He pays taxes and insurance, but the unit he fixed up rents for $2,125 a month, covering his expenses and providing a steady stream of passive income. The major tradeoff was living in a construction zone and without basic amenities like a kitchen and bathroom for months during the renovation.
As the rehab nears completion, McNeeley is considering two options: a cash-out refinance or selling the property to avoid capital gains tax. By using the Section 121 Exclusion, he could sell the property and exclude up to $250,000 of the gain from taxes. Alternatively, he could use the proceeds to buy another rental property, increasing his cash flow.
McNeeley’s decision will depend on an appraisal done in July 2025, which will determine whether a cash-out refinance or sale is the best option. With both outcomes promising positive results, McNeeley must carefully weigh his choices. His story serves as a testament to the power of real estate investing and the importance of carefully planning one’s financial future.
McNeeley’s experience with the ’live-in BRRRR’ method has proven successful in achieving financial independence and avoiding capital gains tax. He is now committed to finding innovative ways to build wealth and achieve long-term financial success through his continued investment efforts.