From $25K to $425K using a construction loan

[Tysson Dykes]

Investment Info:

Other other investment.

Purchase price: $25,000
Cash invested: $200,000
Sale price: $425,000

The family had a 7 acre lot with a broke down single wide one it that was behind in taxes. I offered to develop it for them to sell on the back end. In the course of just about a 8 months we took it from being worth 50K or so and sold it for $425K.

Used the bank to fund the construction, made interest only payments during construction, closed the loan into a conventional and sold it after for one heck of a profit. Then rolled that into a pair of town houses in the city.

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

The path of development was quickly approaching the area that this land was in. It was only a matter of time until the value went up. Once the city announced their plan to build a water treatment plant in the area I knew it was time to get moving.

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

Family had owned the land for years. They had fallen behind in taxes and wanted to sell it for what was owed. I convinced them to give me a year and I could do them much better. They agreed.

How did you finance this deal?

Used a construction loan to fund it. The only cash that we had into it were the interest only payments made during the course of construction.

How did you add value to the deal?

By managing the build myself. I did the permitting, managed the contractors and avoided the turnkey costs associated with outsourcing those items.

What was the outcome?

The outcome was an almost $200K profit.