Investment Info:
Single-family residence buy & hold investment in Los Angeles.
Purchase price: $370,000
Cash invested: $50,000
Purchased a 1920s home in the Los Angeles area which was a complete remodel. Purchased home at $370k and invested $50k into the renovation and after completion home appraised at $510k. Currently, buying and holding but will sell eventually.
What made you interested in investing in this type of deal?
I purchased this home from my grandfather and he gifted me over $115k in equity therefore, it was a no brainer. Of all the the books I read I've heard you make money when you buy, not when you sell so I jumped at the opportunity to purchase property in one of the best real estate markets--Los Angeles, CA. I figured this would be a nice opportunity to get involved in real estate and by purchasing from a family member, I had time to learn and adapt.
How did you find this deal and how did you negotiate it?
This was a deal between family therefore, it was concerned an "arm's length" transaction in which we did not use a real estate agent.
How did you finance this deal?
This deal was financed with a loan however, the remodel expenses were paid out of pocket.
How did you add value to the deal?
Since this was an "arm's length" deal and the owner was experiencing some financial issues of his own, I add value to the deal by keeping continuous open communication and essentially, giving him some earnest money to help him through the process. Also, I did the remodel before I finalized the purchase, this way I showed the owner that I was serious about the deal and ultimately, is helped me avoid having to get another appraisal.
What was the outcome?
The outcome was decent, aside from discovering there was a $70k tax lien on the home, there was more than enough equity in the home to still profit from the purchase. Instead of having $210k in equity in the home, I have $140k--still a nice piece of change.
Lessons learned? Challenges?
Check the title and do your research!! The owner had no idea about the tax lien because he was an older man suffering from memory loss, but when doing an arm's length deal and acting without and agent it's important to do your research. This also includes getting an inspection and understanding the amount of time and money that will go into the project. Also, remember cheap is not always better--sometimes spending a little more is worth it in the long run.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
No real estate agent or contractor used however, I can recommend good laborers and building material suppliers. Please message me for details.
