100k profit on first deal

[Hoa Nguyen]

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $50,000
Cash invested: $20,000

Bought an FSBO for 50k in 2020, put in an additional 20k for repairs and updates. Was appraised in January 2022 for 170K. Currently residing on it, but plan to flip or rent in near future.

What made you interested in investing in this type of deal?

Wanted to move out of Mom and Dad's basement, but also invest in something that would help me generate wealth down the line.

How did you find this deal and how did you negotiate it?

A FSBO down the road from where my parent's lived. Out of curiosity, I knocked on the door and talked to the owner. He explained that he was just trying to get rid of it for 60k. He was bitter-sweet about selling the property. It was his family home where he raised his sons. After his sons moved out, he rented it to someone who trashed it beyond what he could repair considering his age. I talked it over with my bank and offered him 50k. I also promised to fix it up, which pushed him to accept.

How did you finance this deal?

Reached out to family to help secure downpayment, then negotiated with a local bank to craft a custom "balloon" loan to fit my financing parameters. After a year I refinanced into a convention 30 year fixed at a much lower rate than the previous "balloon" loan.

How did you add value to the deal?

I put 20k (financed through the original lender) into updating the property. New floors, kitchen, bathroom, and paint. Mostly cosmetic. The property was already worth more than the purchase price by 50k according to an intitial appraisal done prior to renovations. Since my wife and I intended to initially live in the property, we decided to make it nice. This in return led to a new appraisal that made the property worth twice what we paid for on paper.

What was the outcome?

I was able to add my first investment to my portfolio. This property generates equity and will soon be the legs upon where I start investing in more rentals. Whether that be via a cash refi, renting out this property, or selling for a profit.

Lessons learned? Challenges?

- Don't be afraid to knock on the doors of FSBOS
- Working on your own (minor) renovations can add great experience knowledge to how that industry works.