I F'd Up | Real Estate Nightmare - DON'T DO THIS.

the video you're about to see is a

lesson of what not to do in real estate

I believe that sharing what to do is

just as important as sharing what not to

do and showing you the challenges that I

face when I don't take my own advice and

you know what that's just my personality

sometimes I don't take my own advice and

then when I don't take my own advice I

show you why I should have taken my own

advice

and this video is one of those examples

roll it

oh man this behind me is exactly what I

say don't ever get involved in and here

I am I got myself involved in this two

years ago and we're just now starting

work on it

there's a reason why in the zero to

millionaire real estate investing course

and the do yourself property management

and Rental Renovations course I say do

not get involved with developing if you

are your own landlord and you are trying

to just make money as a side hustle

build wealth as a side hustle go from

zero to millionaire as a real estate

investor developments probably not for

you unless it's your full-time gig now

the beautiful thing is I'm a big fan of

sharing my mistakes because a I will

never make these mistakes with our

startup house hack and number two

I want to prevent you from making these

sorts of mistakes so here's what

happened here's a three and two in a

beautiful area in Southern California

this is probably one of the best

neighborhoods of this entire city I'm

really a big fan of buying the worst

house on one of the best streets and

that's exactly what this property was

except it was a three bedroom two bath

with an illegal addition I'm not the

biggest fan of properties with additions

ever because usually they're relatively

funky but I thought wait a minute it has

an illegal addition right here the

Wall's already built I can take

advantage of new laws that were passed

that would let me turn this single

family house into a single unit in the

front a junior accessory dwelling unit

right there and then turn the garage

into an Adu as well that would be three

units in one it's the

triplexification of California so to

speak and it's this idea that there's

not enough housing in California so hey

rather than people you know parking RVs

outside of their home why don't we

potentially create this opportunity

where you could have three residences

instead of just one now a lot of folks

are really anti that because they think

it takes away the neighborhood aspect

the single family character of a

neighborhood and that's possible because

you end up with more traffic on the

street more cars potentially now these

laws are designed so that they're close

to public transportation there are bus

stops around but you know people like

their cars in America right this isn't

Europe so anyway I thought okay hey the

laws passed no problem the city says

though well actually the state law says

they'll give you an approval on the

project within 45 to 60 days of your

application that's state law that's

what's required and guess what I bought

this property and it took two years and

when I said what happened to the whole

60-day state law thing like 27 different

times they're like yep we don't got the

staff to do it sorry it's going to take

us somewhere around nine weeks to get

back to you every single time we want to

get back to you and so here I am after

two years I finally have approval on

this project to actually begin

development on it which means I had to

sit here paying the mortgage for this

thing and the property taxes somewhere

around 4 500 bucks uh every single month

for the last two years uh golly that's

uh you know 24 months that's uh

somewhere around probably 120-ish quick

Mental Math thousand dollars of um

basically loss as I'm waiting now the

good news is initially the property

value of this sucker I got a really

great deal on it the property value of

this thing just went straight up but

that's now starting to turn the problem

is I'm nowhere even close to selling

this thing so by the time I might be

done renovating it the market might be

down back to where what I paid for it

right so a few quick lessons here number

one even though the law says you can do

something don't believe the government

how is that even a lesson I'm not sure I

feel like that is so profound I need to

charge for it don't trust the government

oh it is Black Friday after all and we

do have a Black Friday coupon code where

you can learn all of my mistakes and

lessons to increase your income get

lifetime access to those courses either

in real estate investing Stock Investing

and the biggest way to learn in my

opinion is learning from other people's

mistakes uh don't make those mistakes

but then also try to perfect uh your

basically do what people are doing

correctly right buy wedge deals cosmetic

remodel don't get into developments and

rent them out but doing developments big

mistake so let me take you inside of

this uh but again to finish that thought

number one don't trust the government

when they tell you they can get you

approvals fast they can't uh and number

two uh don't trust the government not to

rug pull you remember how I said we

wanted to turn this into three units

well they rug pulled us on that too

apparently this area is deemed to be a

high fire severity Zone and in the last

two years after I applied they decided

Well areas that are high fire zones we

don't want the garage to be turned into

an Adu why somebody can't live in a

remodeled uh and and uh you know

retrofitted garage to make it uh to code

for living standards because it's in a

high fire zone I have no freaking idea

but now my project actually only

approved for the main house the guest

unit and a garage and then I have to

reapply which could take another year if

I actually wanted to go through it to

get the third unit so in other words I

could be at three years of paperwork

just to get the three units that the

state law said I would get within 60

days but then again this is also why

some people say just don't do business

in California because this is stupid uh

and they're not exactly wrong about that

all right so let's go ahead and give you

a little tour of this mistake I mean

project I mean I look I I still think

I'm gonna make money on it uh I'm a big

fan again buy the worst house uh in the

best neighborhood but do your best to

minimize expenses let me show you what

the downside is with development okay

the most the like least expensive things

paint carpet kitchens bathrooms right

those things are not expensive they give

you a lot of value to your property

value you know what doesn't give you a

lot of value a new driveway look at this

we don't even have a driveway this fence

that we had to put in and how much

property my how much value my property

goes up for that probably not much at

all and we got to paint it too so it

doesn't turn rotted and brown uh look we

don't even have a garage door right now

so if we have to make this a garage

again we have to put a new garage door

but that's not that expensive you know

what else doesn't give me a lot of money

stupid crap that's buried like this this

is a sewer line in case you're wondering

the sewer on this property actually goes

from the house uh connects to the back

unit over here this looks like a solid

cord nope it's a hollow core door okay

I'm not gonna walk on that

uh anyway it goes back

can end up following falling through the

Hollow Court or that'd be funny actually

make for good content it'd be good click

bait Kevin breaks his neck oh no that'd

be bad uh anyway so um here's your uh

ABS piping for uh your sewer it used to

be clay clay pipe right here and this is

where the clay pipe used to go to and

we've gone into a different direction

over here so that way you don't have to

bury or dig under the property you could

just go along the side of the property

and you pick up your bathroom back here

for the guest unit you pick up the other

bathroom right there you pick up the

other

um uh the front house where you saw it

earlier and then you come over here you

connect it all together and look at that

you send it into the neighbor's backyard

yes that's actually literally what's

happening it goes under the neighbor's

house and out to the street on their

side kind of a weird sewer system but

you know what they did weird stuff back

in the day this by the way is your old

school

clay pipe

let's go ahead and I mean I really don't

want to touch it because it's a sewer

pipe but you know what for the lulls

let's do it oh gross actually doesn't

look that bad

don't look that bad at all

uh there were some bad parts in it

though some bellies I probably should

wash that hand now

okay so let me take you inside oh you

know what we'll walk around this sign to

show you a little more out here so this

by the way is your stucco outside here's

your old ungrounded electrical this is

your new Romex uh I hope this will get

interested I don't think there's well

you could probably get that stapled

right there that'd be good and uh

obviously your stucco mesh here

sewer looks good looks like we've got

what will be a uh sub handle here this

doesn't look like a main uh this is for

the back unit this is a main so

basically a sub panel for the primary

property but it'll be the main for the

uh guest unit back here as opposed to

the

the old junk right here gotta love it so

look at this we got our water pressure

regulator right here this actually looks

like the main water line I'm not sure if

this is for just the guests this is

probably just the guest unit we'll

double check we got gas over here and

what looks like will probably be a

tankless water heater that'll go in

right here

these guys those puppies are expensive

but they're pretty energy efficient

pretty cool yeah you've got your copper

pipe going through here you've got uh

your one tankless over here very nice

look at that nice gas line oh yeah

camera very nice all right

yep this looks like it's gonna be uh

looks like we're gonna have common water

on the house and that is actually very

common with units to have common water

all right cool so that's our outside

let's now jump inside and see what we

got going on over here you can see some

of the wood repair work has already been

started uh very common to get rot uh and

so you come through sand this down fill

it with putty sand it again uh and

really prep this for paint really is

what's going on here

so let's head on inside oh that's new

wiring right here very nice very nice

all right so this is a Latham plaster

property

this is Plaster right here which is a

kind of a pain in the butt to work with

unlike drywall which you can easily cut

this right here is of course drywall

easy to cut easy to work with plaster

hard pain in the butt crumbles very hard

to work with hard it also likes to crack

it's another thing is when you have

construction going on uh it's very

common for any cracks that there are in

a building to actually get worse that's

because when you're doing structural

work you're changing the loads on a

house and it settles overnight when it

expands and contracts in different ways

and so here you can see we've got some

new ducting going in we have can lights

obviously going in because this side of

the house is a little dark so we

definitely wanted to make sure we got

some nice sets of cans here four for the

dining room family room over here we've

got a lot of new structural woodwork

going on over here now in multiple parts

of the house where we wanted to open up

the floor plan a little bit what we've

done is we've put in a structural header

you can see with our uh post right here

coming down Beauty beautiful thing about

this post is actually not that beautiful

we had to dig a massive hole here and

basically pour concrete under where the

weight of this post comes down so you

have to underpin it's called you

basically dig a giant hole and get under

that concrete there to support the new

loads going down onto these new spaces

so you dig a hole from the outside for

this one and we probably had to do that

about 20 times for this property here

I'm surprised the engineering didn't

call for uh an engineered beam right

here but that's okay sometimes they

don't it's honestly not that big of a

span so it's probably not that big of a

deal still got the original kitchen here

the original kitchen cabinets it's

really cool though the rounding of these

you don't really get that anymore with

cabinets today unless you get something

super custom but obviously it's all kind

of old and grungy in here and really

right now what's Just Happening is the

framing and the structural work this is

the laundry room here you can see this

whole wall has been freshly framed over

here got your strike plate so somebody

tries to hang a picture there they don't

puncture a hole into our new pipes we've

got this is where your laundry machines

would be so you got gas over here we've

got a

I'm sure they've got it figured out but

I want to see where they're going to do

the vent

for the dryer but uh I'll ask them about

that because I don't see a dryer I don't

know if you want to go up for the dryer

vent but we'll see uh anyway this looks

like it'll be for a sink over here drain

for that very good on the other side you

actually have what we're turning into a

master now the floor plan wasn't like

this before it was a little funkier so

I'm really happy that we're going to be

able to turn this into a master but

that's another downside about doing

renovations or like actual larger

Renovations uh development kind of stuff

is you think oh okay well if we're going

to be submitting plans well then we may

as well make a nice little closet for

the toilet let's make a nice new area

for uh the shower the bathtub or

whatever and oh let's do all new

Plumbing

all this stuff it just costs a lot of

money uh I mean here you've got new

Plumbing going through the whole place

not only do you have that but this

entire wall is fresh lumber right here

if up uh sheathing I'll apply with

sheathing on the outside you've got your

bolts over here for the underpinning

you've got a bolt here you got a bolt

here we had to add that in you had a

boat there keep in mind that bolt goes

all the way through the existing

foundation wall of the property and then

into our underpin that we dug underneath

the property and poured underneath the

property so like this wall is really

beefy like we're making it good you know

that nice new dual pane window over here

now it's got some quality to it uh new

uh return duct over here uh but you

could tell based on the size of it

smaller Supply docks got some can lights

going in Simpson structural Nails great

obviously the cosmetics TBD exactly what

we're going to do here but uh

yeah probably something actually

honestly let's let's just think about

this right now oh that's unfortunate

that this piece is missing but uh this

is such a tight bathroom

that there's probably not that much you

can do in terms of if you took this out

you're not going to get this thin of a

vanity anymore I would like to honestly

see this transformed into something

that's

restained or painted probably it's a

cheaper you know clean all this up make

it Glide actually it doesn't Glide too

bad at all uh glaze this get rid of the

baby blue over here I think we've got

some baby pink somewhere as well uh and

modernize this but this is actually not

a bad uh countertop because it's perfect

for the size of this space over here

even the tub even though it's dirty now

that's a nice tub it's an iron tub you

know we got some holes in the tiling

here quite a few of them but we can fix

that uh so I I think there's some

potential to save that I might think I'm

crazy but even this original door here

this is actually pretty nice nice store

here

uh this is what new electrical going in

looks like by the way uh

uh yeah Romax give me the power all

right uh you can see here usually white

will be your light switches yellows will

be your plugs

although every electrician does things a

little bit differently uh yeah you can

see yellow for plugs over here so this

here is becoming uh like a little bit of

uh this is actually interesting I wonder

why we are Walling this for almost a

hallway here I

this might be it's a double plated wall

here this wall might be structural which

is actually kind of unfortunate

because

oh I want to look into this I don't love

this wall right here because see this is

going to be the door to the guest unit

over here and then you can really close

this off you wouldn't even need a door

here unless of course you just rent it

out as one giant unit then you would

want a hallway of some sort here or uh

yeah I mean the hallway makes sense

because the reason you would do this I I

see it now the reason you would do a

hallway like this is if you want it all

to be one home which is possible it

might make more sense to rent it out

that way and then let them sublease it

if they wanted to but uh if it's

abnormal to have one room here connect

to another room without a hallway so

that's probably What's Happening Here

so that way this could be its own sort

of bedroom we'll have to make sure to

insulate that wall very well probably

spray foam and then fiberglass so you

really get almost a double insulated

value there this uh is and that's the

funky thing about additions is this

would be your Junior accessory dwelling

unit and this is actually where the

kitchen's gonna go uh you could see

water line for a refrigerator here uh

countertop plugs right here so this

would be your your small kitchen maybe a

little family room over here uh yep nice

new framing over here on the ceiling

perfect and then you step down it's a

little funky over to where your bedroom

is here

a lot of new framing over here bolt bolt

bolt bolt bolt bolt that's a lot of

bolting to make you do in California

that's a lot of work each of those is is

a lot of Manpower and they make you do

this stuff really for uh for earthquakes

I mean even just these Simpson ties

right here uh you know they're the a35s

they're like 35 cents a piece maybe 60

cents now with inflation uh and you nail

them in you could also hex screw them in

but it takes a little bit more time and

it's a little bit more money uh but

they've got the same structural rating

the um

these walls turn beefy I mean compared

to what it used to be just compare okay

like here's your kind of old school wall

that's one that's left I realize that's

an interior wall but you probably can't

even see a single bolt anywhere on some

of these uh and then you compare that to

like our new walls bold play play plate

plate plate right it looks so much

better so much stronger nice dual paint

window over here

so this looks like this is the laundry

stack right here so you've got the

washer dryer stack here that's great uh

all new Plumbing over here I mean this

is this is bitching look at this the

triple stack uh switches here this looks

really nice this is going to be gorgeous

it's really going to be great uh and I

like what they're doing here I'm not

sure what the idea is about why this is

a hallway if we're trying to separate

that off

so I'm not sure about that

uh I think the the idea might be future

convertibility right you know maybe you

you drywall in that door and then if you

want to give somebody the option to

really quickly like open or close you

could do that but if this is its own

unit this section here becomes a dead

space uh so I'm not

thrilled about that but I'll get to the

bottom of that okay so otherwise yeah

this it's like it's a great property

where I do I think this will end up

being profitable probably I mean if this

were done right now today you know what

we're in

750k plus college is 200k and holding

costs 50k paperwork permits you know

you're into it for a million bucks

before you've actually spent the money

on the fix up all the fix up and such is

probably going to be somewhere around

150 maybe even a little bit more you

know could we sell it for one three one

four uh actually yeah I'm the cops are

there for that right now

uh well will that be true in in you know

nine to 12 months from now I don't know

maybe not and if not then we'll just

rent the sucker out and uh and give that

person maybe the option here that's I

think that's why the hallway's there I'm

a little caught up in that and we also

got to figure out what to do with the

garage

honestly I'm so exhausted with dealing

with the city I'll probably just turn

this into a garage and then just never

deal with these kind of developments

again or or the way to do it if you

wanted to know a way to do it is what

you do this is this is the trick okay

this would be the way to do it

you remodel it cosmetically you rent it

out you get a tenant in there you got a

10 in there for a couple years or

whatever while the tenant is in there

that's when you go through the process

of doing the the accessory dwelling unit

so for example if I ever wanted to do

this again or do like adus in the future

what I would do is because I'd like to

be able to rent three units as opposed

to one uh now I've got two as opposed to

one but whatever

what I would do is um if I ever did this

again in the future and I wanted to do

an Adu I do exactly that I would say all

right let's let's get it remodeled let's

get it cleaned up put a Tenon in

rent it out while it's rented out

to be up front with a tenant hey we

every so often an architect's gonna come

by and just to do some measurements and

plans

future planning get it approved and then

just sit on those approved plans until

we're until maybe the tenant leaves or

we're ready to do a renovation or

whatever but that will now eliminate all

of your vacancy holding costs much

better strategy so uh eliminating costs

huge huge Factor when it comes to real

estate you do not want to be sitting on

vacant real estate and again I'm a big

fan of know what your limits are know

what you're good at and so for example

with my housing startup house hack we're

we're not going to be doing this stuff

we're only going to be doing basic

remodels buy properties below market

value get them turned around in about 45

days and then rent them out simple we

don't even want to deal with the city

it's dealing with a city is a nightmare

and you have the neighbors and everyone

anyway uh check out the programs I'm

building your wealth down below for more

perspective thank you so much for

watching and we'll see on the next one

bye