The $1M is the remaining balance of the purchase price.

Capital gains are calculated as:Sale Price - (Original Purchase Price + Capital Improvements + Selling Costs) - depreciation (if applicable) = Capital GainYour mortgage or HELOC balance does not affect this calculation—it only determines how much cash you take home after the sale.In Massachusetts, if the home was your primary residence for at least 2 out of the last 5 years, you may qualify for the Section 121 Exclusion, allowing you to exclude up to $250,000 (single) or $500,000 (married filing jointly) of the gain from federal capital gains tax.

I was dizzy and off-balance for weeks following.

The 5% of the remaining balance late payment fee is a little much IMO. 

Given that the property was worth $390K in its current condition, I saw an opportunity to make the numbers work while keeping my upfront costs low.Instead of increasing my cash offer, I negotiated a $25K down payment with the seller carrying the balance for two years through owner financing.

Also, how do you balance cost-effectiveness with providing a high-end feel?

More risk on my side, with entire investment at risk, but the upside balances the risk. 

@Darrius LloydTo start your house hacking journey, research neighborhoods with potential for multifamily properties and balance affordability with tenant quality.

These area are offering a good balance between appreciation and decent cashflow. 

Maybe there is a balance of both?