I'm Stuck in a Multimillion Dollar Failure... it sucks

in 2020 i invested 10 million dollars into real estate and part of what i did turned into a massive mistake to understand my massive mistake i have to give you a quick summary of the normal bread and butter money that you can make in real estate the things and systems i talk about not only on this channel but in my real estate investing program or my property management and rental renovations program where i outline all my maps and everything this is the simple stuff this is the bread and butter where you make money basically you take advantage of the fact that 85 to 90 percent of people wandering around trying to buy real estate are absolutely totally clueless about even what a gfci is or what paint and carpet actually costs and how to deal with asbestos or mold and how to remedy things in a very safe high quality way quickly most people are totally clueless about them and that's okay but it gives me an opportunity to go in and make money because i know how to do high quality work while renting properties out quickly downtime is toxic in real estate well this went great for the vast majority of properties that i bought last year but things went wrong when i broke my formula see i always teach kiss keep it simple stupid well you start running into issues when you deviate from that for example if you have a formula that says you go into a market and you buy houses for say four hundred thousand dollars in a neighborhood where the houses sell for six hundred fifty to seven hundred thousand dollars you put some money into the property making it safe and beautiful and then you rent it out you refinance and you repeat the process you don't have headaches you follow the formula you make money over and over and over again the only thing that makes it harder is finding deals and so you're always ready to buy a deal deal comes up matches the formula you buy it you're done well i broke my rules something in california and this really applies to what the store here we're about to go into applies to you whether you own real estate or not and it doesn't matter where you own it it's bad anyway i got persuaded by something called ab68 in california assembly bill 68 basically says you can add two guest units to a single family house and up to two guest units or adus they're called to a multi-family property if you follow the rules but the problem is if you're an investor you only have until 2025 to take advantage of this rule otherwise it disappears and a new requirement comes in that says you have to live in these properties so in other words between now 2021 here and 2025 while the start of so you really got 21 22 23 and 24 you got four years over the next four years in california for example you can go take properties and add units to them and you don't have to live there hey premise sounds great california has a housing problem there's plenty of parking in the areas where i'm investing and the rules say hey no problem you can add units here totally fine go for it kevin go find some deals just submit a permit application and within 60 days you'll be building your guest units don't worry the law says so so i bought three extra places one is a property i bought at court i'll actually link the video of me buying this property at court down below it's a great video if you haven't seen it again this is a single family house and a multi-family zone and my plan is to turn it into well from a single family house into five units basically three legal units and then two legal accessory dwelling units law says i can do that if i get that done i'll turn that 950 000 property into over three million dollars property number two was a three unit apartment building near downtown and this property used to be a four unit building so i'm gonna take advantage of the fact that i could just turn it back into a four unit building but then also add two guest units because law says i can do that property costs around 1.25 million dollars and after i turn it into six it'll probably be worth in excess of two and a half mil it's not supposed to be too terribly expensive either and this is not as expensive of an a of an area as the other one but uh going to property number three so i got a third one third one is a single family house that i'm turning into three units because it's an area with large streets high walkability lots of parking lots of charm and i want to maintain the original charm but also follow the law and be able to add two units so this is a property i bought for seven hundred fifty thousand dollars and when i'm done it'll probably be worth double that should be worth double that one 1.4 maybe one five we'll see so maybe double anyway that one should be pretty simple i shouldn't have to spend too much on that one well after i purchased these properties everything was going great in fact at the same time i was purchasing these properties i kept renovating my regular deals i kept following my formula and doing my regular deals and those deals go fast i mean i'm talking 90 of my deals are fully renovated in 60 days and they're rented in the next 10 days it's not that hard once you get a formula you know the tricks of the trade you know who to call you know what to do all the stuff i talk about uh either on the channel or in the courses where i outline it coupon code down there below if you want but take this lesson before you do anything code is total but i want you i want you to really listen to this lesson that's coming up here because you'll see the pain when you don't listen to what's in the course see i'm human too i can i can deviate from what's in the chorus and what happens i get boned hard and it sucks so here's the thing real estate might be less volatile than stocks but it's not less stressful it's more stressful especially if you break your rules follow the rules it's easy break the rules world of hurt so here's what happened this is going to sound insane but it goes back to november of 2012. the bottom of the real estate market i was selling a property located at 1995 channel drive a property that was in my opinion a beautifully renovated property and we'll look pictures in a moment complete with permits everything was done great this property was such a nice remodel bottom of the market anybody who bought at the end of 2012 knows that they're up big freaking money so i've got these clients buying the property there were some issues that came up in the home inspection we ended up asking for something like five thousand three hundred eighty dollars in repairs i think it was uh you know we would put i i we usually ask for repairs you know it's it's not unreasonable in fact here it is i have this email from back in 2012 put together some costs from lowe's we'd put together an explanation of why we wanted some money and which companies and some of the problems we had see look at this well i printed this today but here gmail request for repairs 1995 channel drive here you go look at the date on that sunday yep working on a sunday as usual sunday november 4 2012 5 27 pm geez dinner time nothing's changed uh but anyway yeah so so you know the usual stuff is kind of going on and we'll come back to that in a moment so we asked for some repairs and the seller ends up giving us uh the 5 300 or whatever that we asked for for the property but the buyers ended up introducing a civil engineer to the property this uh particular civil engineer ended up uh doing uh you know he was sort of running a private engineering consulting business where he would consult people on new construction whether those were additions or brand new homes basically his goal was to be uh you know a civil engineer is somebody who says hey look if you're going to build this new construction home you should have a foundation that's this deep and you should put the rebar this many inches apart and basically they help you build new homes right this guy's name was scott private engineer worked on these new construction homes comes out to the property just to give these first-time home buyers you know a blessing that everything's good first-time homebuyers and i'm supportive of this as a realtor uh you know i've always said it's it's good for you to get as many inspections as you want to pay for there's some bare minimums you should get like a sewer inspection from the house out to the street not the clean out to the street big mistake a lot of people make uh and a home inspection and then follow up on those red flags but hey you know they wanted to get an engineer no problem let's do it set it up walk around with the engineer i don't know what it was folks but this guy scott absolutely hated the property it kind of felt like he didn't want people to succeed with how much this guy hated this property uh and like i give folks a benefit of his out like maybe maybe he got like a headache because he didn't have your coffee today or something but but folks when you start coming out to a property and you say things like this i wrote this down because i can't get this quote out of my memory and i want it gone i want this memory gone but i can't get rid of it i can't shake this pain anyway this was back in 2012. the quote was this house will have hairline cracks in three months and massive settling cracks and structural issues will appear within six months of you buying this home this is a horrible house to buy what do you think the buyers did yeah so uh let's just say it was a little unfortunate uh they were buying this place for around 440 000 in fact uh if you go back to this request for repair email which i briefly showed but you can actually see some of the uh the frustration that and i tried to dampen it but let's say tensions got real high real fast it's like okay hey look he could have his opinion but we could get second opinions too but anyway here hi bart we are very close clearly the buyers were on the fence for the longest time with this property primarily due to as you know like we went back and forth on this the structural engineer scott scaring the living hell out of the buyers folks i wrote that in 2012 that this guy scaring the living hell out of the buyers and so the buyers are first time home buyers so uh they are as anxious and stressed as they are excited anyway you know right doing my job right trying to trying to provide information to the listing agent so he knows why the buyers are basically not removing their contingencies it kind of seemed like the buyers were dragging their feet at one point the sellers were like why aren't you all closing and it's like oh i'm stuck in the middle like ah well let me introduce you to scott well let's just say unfortunately because of this engineer the buyers bombed the deal they canceled they walked away not only did i lose the sale and the seven thousand dollar commission but i also lost my customers as clients because instead of buying a house they decided to get married so they took their entire down payment and spent it on a wedding instead of buying the house because scott told them that this house was basically going to fall down well now here we are eight and a half ish years later take a look at this folks this is the house 1995 channel drive it just sold september 25th of 2020. for 892 000 more than twice what the buyers would have paid for it and if you go to the pictures oh now we're on street go to the pictures pictures no cracks that's a power line no cracks pretty nice smooth stucco don't even see hairline cracks beautiful property pretty much the same renovation that it was eight years ago looks like a candle burned out but it's a great house and so somebody uh was able to resell it for twice basically what uh what my buyers would have paid for it at the time oh well you know hindsight is 20 20. uh you know and uh i mean it's it's an old home right like old homes don't uh aren't perfect i mean even over here where you've got some staining from the sprinklers i still don't see any cracks around here anyway this is the property sold for twice what the buyers paid for it and you might be wondering now kevin what does this have to do with me well let's just say you're about to vomit when when you find out what this has to do with me maybe you already vomited at the fact that these people spent their down payment on a wedding instead of doubling them i gained 450 grand in real estate in eight years uh but hey hindsight hindsight okay before i tell you about the madness of what i'm dealing with now i have to show you this folks this is my new way of finding real estate deals i use this app called deal machine which you can find out more by going to medkevin.com deals but it's basically an app on my phone i can open it up and here's actually that property 1995 channel drive and take a look at this when i click on it it not only tells me that the place sold for 892 000 it doesn't it also provides me the owner's name it also if i wanted to i could click a few buttons and get the owner's phone number but what i like doing is i could just click the lead button here add a lead and now all of a sudden this property will start well actually not the property it's wherever the owner lives this owner address dude right here which is all public records this guy is going to start getting my flyers where i asked them to please sell the property to me in the event they're interested in selling now this property did just sell and i don't like sending marketing to properties that are uh well renovated i want fixer-uppers so i'm just going to undo that really quick we'll take this uh we'll take this off of the with marketing status and we'll go ahead and uh you know just trash this lead here so that way we don't send uh this person any more flyers there we go uh so anyway the beautiful thing about deal machine is my goal and right now i'm at about 550 flyers my goal is to send out about 5 000 flyers every uh you know every month-ish and uh over this next year i'm going to find out how many deals i'm going to be able to get pre-market especially fixer-uppers so that way i can do my nice 60 day renovation follow what i teach in the real estate courses linked below and i'm done i don't have to deal with mls multiple offers i don't have to deal with that stuff it's my strategy so check out metcalvin.com deals if you want to try that strategy as well looking for your dream home send them flyers do it with this their little postcards they do everything for you automatically sends you postcards or sends the postcards to the other folks super super convenient you push a button and a postcard goes out with your face on it if you want your face on it or your information on it it's really really cool custom way to send marketing so let's go back to the story here oh man remember i said you were going to vomit well remember scott the engineer guy who basically scared the living he double hockey sticks out of my buyers and bombed the deal well let's just say he quit doing private work he quit being an engineer after that deal i mean maybe not necessarily right after that deal but at some point between 2012 and now he quit being an engineer usually when people quit when they have their own business when they're an entrepreneur when they quit is because they can make more money somewhere else or they find a better opportunity right i mean if you're making more money being self-employed why would you get a job somewhere else right i mean maybe you want some less stress who knows whatever depends on your personality right well i don't know what happened but folks i'm about to pull something up on screen and let's just say when i made the connection felt like crying folks take a look on screen right now there you go scott mr scott right here works for the city of ventura now construction permit supervisor for the city of ventura's building and safety department committed to serving you and here he is in an email exchange with me again eight years later baby working with scotty again except this time it doesn't feel like i'm working with scotty it feels like i'm getting screwed all my plans have basically gotten assigned to scott scott never forgot what happened eight years ago bombed my deal i wasn't mean to him afterwards i did suggest we get a second opinion and he didn't like hearing that but uh we'll just leave that at that but uh let's just share a little bit of the hell that has been happening since over the last four months well first california says that adus must be reviewed within 60 days to accelerate housing california needs more housing so hey let's just review things within 60 days we shouldn't make people wait let them get their permits within 60 days if they want to add units folks it's been four months and it's still going when i asked the city about this they said yes sorry we don't follow that law we just deal with plans in the order they come in adus don't get any priority so when the state of california passes a law that says you have to respond in 60 days you are above that law because you don't want to incorporate that into your rules just one example okay what else well let me show you like literally i'll show you here take a look at this i'm going to pull something up here and you're going to see the beauty of working with cities and this is why this is why so many people are like kevin kevin how can my contractor doesn't want to pull permits i'm not going to say anymore the law also says that setback rules like if you want to convert an adu here and you want to add a door for the second story so imagine there's a second story here and there's a little staircase over here the law says it does not matter if you end up encroaching on setbacks for normal properties for adu so you get exceptions for that if the city says no no no kevin if you're going to have a staircase here that's too close to this building even though there's plenty of room for a staircase right here and you still have access to the back over here plenty of room to do a staircase over here no no no no we don't agree with that law we want you to not have a second unit or if you have a second unit we want you to move the upper part four inches over so in other words the bottom could be a square but then we want the top to be four inches over and and then there's a weird offset on the sides and the staircase has to go somewhere else you got to figure that out maybe put it in front or something like that so it looks dumb and you have a staircase from the front that's your curb appeal as a staircase that's just one property here's another example though of the ridiculousness that i get to deal with with our boy scott take a look at this this is a model match of another property that i have been planning with mr scott this right here as you can see there are three sort of windows here right one two three okay these are all model matches the same exact square footage of a beach house that i bought let's go to the next one here's another one look at that one set of windows another set of windows another set of windows let's go do another one here we go one set of windows another set of windows another set of windows could be a slider window whatever right here's another one all model matches one two three all the same right yes yes that might be how these properties were built but apparently let's go into my actual project right here apparently if i put in a french door right here and i put in a window right here so one two three and i put in a smaller french door here because this used to be an eight foot opening so we've actually added even more lumber on the sides like we closed this thing in even more well apparently even though we are building within the exact same framing that there was previously as you saw in all the model matches scott doesn't think that's good enough even though we're over engineering the work that we're doing in with way bigger headers and structural hardware and structural work that we need scott says um yeah i work in new construction stuff and uh well i don't like the old rules that say hey look if you build within the old rules your grandfathered into the old rules i want you to rebuild that entire wall of that property because it's a two-story and we want to build it like a 2021 property thanks scott thanks man really really making it enjoyable to work on these projects but that's not all not only am i having issues with these properties but i've got this other one that we're also working on this is that single family for 750 000 right here this is the other one where we've got a detached garage that has two by four walls and the two by four walls you can usually convert a garage to an adu when it has two by four walls you just have to put a little higher quality insulation in so you can still meet the same insulative standards city says yeah we don't care about better quality insulation we want you to basically tear the thing down and rebuild it with two by six walls because you know we want to make your life as difficult as possible okay some of this is just the generic bull crap you go through when you deal with planning right some of it is some of it is extreme some of it is just absolutely ludicrous and stupid but you start getting a little concerned that maybe you just shouldn't have done development work maybe you should have just followed the formula and stuck with basic work but then you think hey maybe maybe we could just ask for a reassignment and get a different plan check or like a supervisor right no scott's the guy and then you think okay well what happens if you don't listen well then they find you 450 a day and if you don't pay the fine then they'll send the fine to the california franchise tax board to basically lean you up until you pay or the next time you file your taxes include that as do and payable on your taxes and if you're late on your taxes then you get an irs tax lien then you think well maybe maybe you just need to sue the city because after all they're not following the law that exists and they don't have their own this is not like a situation where the city has like higher or or stronger standards than the state because the state sets these rules the state sets the adu rules that say no no no all municipalities shall follow these rules so we can get more housing in california but if you want to dispute or sue the city rather you have to file a city dispute first before you could sue them then you have to go through the city dispute process and then maybe you could sue them but then you have to hire an attorney and then you're spending more money than if you just rebuilt the damn properties so basically even when you're legally right in pretty much everything that you're doing you end up getting reamed by the powers that be at cities when you go into doing renovation work and development work unless of course you're building from scratch you know you've leveled the property you're building on a plot of land but even then people are like oh yeah i'm going to build 10 units and the city's like how about seven it's horrible so if you've made it this far please give this a listen please please please please please i beg of you stay away from big renovations stay away from things that require you to submit architecture plans and engineering plans anytime you hear oh let's submit plans to the city run away don't do that just don't do it and this is not saying don't follow the rule just don't do the renovations that would require that you want to go do paint and flooring and put in some new kitchen cabinets and bathroom vanities and redo the bathrooms and redo the landscaping you don't have to submit plans for that kind of crap in almost all cases you you try to add two headers like in that beach home boom planning screwed enjoy waiting six to eight months while you wait and fight with city you wanna follow the law that says oh we're gonna let you do adus in 60 days enjoy the eight month process you just signed up for yeah so there's an update for y'all now just make sure to go down to the link down below and get your life insurance in as little as five minutes by going to mckevin.comlife and if you want to see me buy that property in court i'll link that down below as well thanks for watching everybody we'll see you next time you

Channel: Meet Kevin

Views: 240,923

Keywords: real estate, investing, beginners, investing for beginners, graham stephan, chandler david smith, ryan pineda, real estate investing, bigger pockets, buying real estate, investing in real estate, buying a house, renovating a house, contractors, construction, matt risinger, failure

Id: lhnfRqiM1j8

Length: 25min 59sec (1559 seconds)

Published: Tue Feb 16 2021