A history of my first property purchase.

[Troy Parker]

Chronology of my first property purchase.

• November 2023 – Preapproved for 250k. Began scanning MLS everyday to find a deal (I am my own realtor and this is my first transaction).
• January 2024 – After searching deals daily, I saw a property listed that day for 219,500 two blocks from my parents home and promptly made an offer that day for 222,222.
• Listing realtor kept the bidding open for a week and asked for a counter based on competing bids (in hindsight I don't think there were actually other bids). I countered: 224,444. My offer was accepted and we were put under contract for a bank owned home that was recently foreclosed.
• The four point discovered errors that needed to be rectified prior to obtaining conventional financing. Luckily bank agreed to make repairs needed to pass four point.
• I had to get a renovation loan insurance policy where I paid for a year up front in escrow and they would pull $400 a month till renovations were completed and then I could find a new insurance policy and the remaining escrow would be transferred to the new policy.
• Paid $540 for an appraisal. Property appraised for 245k; however, it was classified as a c5 which prevented most lenders from issuing conventional financing.
• I contested the appraisal and the appraiser held their ground, but their supervisor told me that if I slapped a coat of paint on the cabinets (these needed to be replaced due to wood rot) it would be an easy c4.
• I paid $520 for a new appraisal, contacted all my family and friends, deep cleaned the home and put a fresh coat of paint on the rotted cabinets and over the doors. Second appraisal came in as a c4 and at 240k value (woohoo 15k equity gain).
• After two extensions, a litany of repairs, issues with the four point and appraisal, I finally closed on the home 3/29/24.
• I put 5% down, expecting to get an additional 2.5% back from my realtors commission. I planned to put in money out of pocket towards renovations to force appreciation, get to the 78/22 debt to value, and eliminate PMI.
• I got quotes from 4 different contractors. 2 didn’t work out, 1 was very expensive, but number 4 was perfect. A little unreliable with timing but I wasn’t in a hurry and the price was right. I was going to continue living with my parents until the renovations were completed.
  
• I hired contractor 4, put a lock box on the property and starting purchasing materials and placing them in the garage for the contractor to get started. The scope of repairs include: complete renovation of master bathroom, kitchen, and guest bathroom.
• I spent about $1,700 on materials for the master bathroom (vanity, lighting, tile, grout, 2 medicine cabinets, cement, drywall, etc.). Contractor quoted me 4k for the labor. Total $5,700 for bathroom remodel.
• I have begun starting to look for cabinets now that I have completely budgeted for the master bathroom and the contractor quoted me about 2k to install the cabinets. My budget for cabinets is 8-12k.
• I am hoping to remodel the guest bathroom for around $4,000.
• Being conservative, I expect to spend around 25k in renovations for the master bath, kitchen, and guest bathroom. I expect the property to appraise for 300k after renovations.
• After renovations, I plan to find a roommate and rent one room for $800 a month and split utilities or $900 flat. I signed an addendum that I have to live in the property for one year as a primary residence.
• After year one, I am torn on whether I should flip the property (it's a wood home built in 79 in a flood zone) and expect around a 30k return. Or after I find a new insurance policy and eliminate PMI I expect my monthly expenses to be around 2k and I expect the property could rent for at least $2350 and potentially 2,500. I would definitely hire a management company if I plan to rent the property.
• Back up plan is to stay there two years, sell the property and avoid paying taxes.

Fellow BiggerPockets community, I would love some advice on evaluating whether I should flip the property to reinvest in a bigger home or multifamily unit or rent the property with a management company?