Original subtitles

-...to meet you. -[Drew] Pleasure.

It's quite the project. Ahhh! This could be a money pit.

You got to pick us. You have to.

You're pushing beyond what this market will give.

No risk. No reward.

-I'm Sheryl. My daughter, Jasper. -Hi, I'm Jasper.

[Drew] That's a good-looking building.

We have some issues.

[Jonathan] How much have you wasted on this project so far?

Close to $200,000.

-Yeesh. -200 grand.

[Jonathan] I'm continuing to hunt for a multi-unit building

for one of the first investors we backed, James and Isabel.

I just finished touring James and Isabel through a property.

Oh, my gosh, they're not really listening to me.

Massive undertaking. Potentially massive profit.

It smells like money.

[Drew] We just want to help people get into good investments

or to help save them from what's turning into a bad investment.

I don't know what I'm doing.

I've never flipped a house before.

Had you rented it out from the beginning,

-you would have made over $400,000. -Ahhh!

We want to back you because we can

really help you get this project done.

Thank you, guys. You have no idea.

$100,000?

You're freaking nuts.

[Drew] What you're looking at doing

with this house seems impossible.

We made so many mistakes early on.

I wish we had a mentor

who could tell us, "No, no, guys, bad idea."

[laughs] Rookie mistake.

They're already 200 grand in the hole.

-Obviously, this needs some work. -Yeah.

On paper, some things can look great,

in person, whole different story.

We got a problem. You got to tell these guys

to stop everything right now.

If they don't get this right, I think they're done.

[woman] This is life-changing.

This is gonna turn the page to my career.

Who wants to make some money?

Why are we backing investors? What do we get out of it?

Well, we don't make any money by backing these investors,

but when they succeed, that's good for our reputation

and that is good for our business.

That's why we have to choose wisely.

I find it so funny how many times we've talked

to people about investment that they're working on

and they've bought the property, they're already renovating,

and then we ask about their design or what their plan is,

and they don't know that far ahead.

They just ripped it apart to start renovating it.

They're like, "Well, it's a property.

It must be worth something in the end."

Nothing should be left to guessing.

If you know the numbers aren't gonna work,

you walk away before you've shelled anything out.

You have to understand the market

and you always have to play worst case scenario.

Anyone who plans on best case scenario is going to fail.

So it's a beautiful street.

Our next investors are in Valley Village.

It's nestled between trendy neighborhoods like Studio City and NoHo.

It's known as a family-oriented neighborhood

with upscale residences, tree lined streets, parking and privacy.

Today we're meeting veteran investors in trouble.

[Drew] It's a flip house.

They're looking to make a good return off of this.

We really want to find out

if they're smart with their money and if they know what they're doing.

Oh, my gosh, it's just--

I didn't realize it's sticks.

-[Drew] Yeah. -They took it down to nothing.

Wow.

[Sean] I've been in construction for 15 years.

Building homes and flipping homes

gives me the freedom of doing what my vision is.

[Natalie] So I'm a real estate agent.

We decided to combine our expertise.

We need the brothers because though both of us

have been in the industry for many years.

In this market, the costs from everything has gone up.

The profit margins are becoming very, very thin

because of interest rate.

So we need all the help we can get.

-Nice to meet you. -Pleasure. Drew.

-How are you? Sean. Pleasure, man. -[Drew] Nice to meet you.

Wow.

This is quite the project.

First impression... Ahhh!

This could be a money pit. It's torn apart.

They are well into this project.

There's no turning back.

So when you got the house, what was the state of the house?

It was a house, but it was a very, very, very old house.

I don't think it's been touched since it was built

in the '40s, I believe.

-Okay. -[Natalie] So, uh, we knew we needed to do work,

and it was just a matter of what will give us the most value

at the end of the day. How much work should we do?

We bought the property three months ago.

We got it under market.

We saw the potential to improve it

and eventually flip it and sell it for property.

[Natalie] We will be completely gutting the house

and creating a five bedroom house plus an ADU.

We are going to add a pool

and completely landscape the exterior as well.

We want to do something that really stands out,

and that maintains its original charm.

Have you changed the footprint? 'Cause it looks like in addition--

[Sean] Yes, we're adding square footage at the front.

-[Natalie] The dining room is at the front, -[Sean] And then,

into the primary bedroom.

-[Jonathan] Okay. -Total of 499 square footage.

-And raising... -[Sean] Raising it to ten foot.

-[Jonathan] Okay. -[Sean] Ten foot ceiling.

[Jonathan] And how long did it take for you to get your permits?

Within 45 days. We already got a permit.

How did you turn this around in 45 days?

Because most projects with any additions

on it right now, you're sitting for months.

-Four or five months. Yeah. -Yeah.

The reason that we chose to do it under 500 square feet

is because for cost effective purposes,

but also with regards to time,

it goes through the city much quicker if you add under 500 square feet.

-Right, right, right. Okay. -[Drew] Yeah.

[Jonathan] The fact that they kept the additions

under 500 square feet,

-that's genius, because if they had even gone... -Yeah.

...another 50 square feet,

they'd be waiting six to nine months to get an answer.

[Natalie] And the footprint of the house was pretty big to begin with.

It was about 2800,

so we figured 500 would get it just over 3000.

Oh, okay. I thought your 3,000 was including the garage.

So what's the additional square footage for the garage?

Yeah, so, the garages stay in the garage.

There is a storage behind it.

We're converting that to an ADU. The ADU is additional.

[Natalie] Yeah, and that's 450 square feet.

Oh, okay. What--

And who's the shrewd negotiator between the two of you?

Oh, we're a good team.

-[Jonathan] Oh, yeah? -[laughs]

[Drew] Who's good cop, who's bad cop?

-We're bad cop, bad cop. -[all laughing]

No, wait. Are you a couple?

-No. My spouse works with him. -[Sean] Yeah.

They're on the construction side. I'm on the real estate.

-Yeah. Her husband is my partner. -[Drew] Oh, oh. I see. I see.

-So you're a licensed agent? -I am.

-You're a licensed contractor? -Yeah.

[Drew] Can you run through the numbers for us?

[Sean] We bought it at 1.4.

-[Drew] Okay. -[Sean] Right now my budget is at $700,000.

That's including everything,

and hopefully, our exit is going to be 2.8. 2.9.

You know what the prices are in this area?

-Yeah. -Trying to get 2.8 or 2.9,

you're kind of pushing beyond

what this market will give, right?

Absolutely. I agree that it is on the high end of the comps,

but I know that when you create a good product, it sells.

Well, people will buy it at the right price, if you have it.

I mean, you could... You could ask $4 million for this.

-It's not going to sell for that. -Right.

I'm guessing if you're putting $700,000 into this,

you're putting in nice appliances, great countertops.

You're adding a lot of function, right?

Have you thought about trying to find

a little bit of savings to maybe come down

so that you're still at a good high price point,

but you're not pushing the limits.

So first of all, no risk, no reward.

Um, but I've been in this business long enough to know that

if you want someone to pay $3 million

or close to $3 million for our project,

-you have to have top of the line appliances. -Mmm-hmm.

You have to have nice flooring. You have to have high ceilings.

Like those are things that you can't compromise on.

The more you spend on the finishes

and the more you pay attention to the style,

the more that generates in return.

And, I believe that if you deliver a good project, there will be a buyer for it.

-And have you seen this yard? -[Jonathan] Yeah.

-[Natalie] We have over 11,000 square feet. -I mean, yeah.

[Natalie] So again, if you look at the comps,

maybe they don't reach $3 million,

but they don't have this kind of yard.

[Drew] Some people think a good investment

is just how much money you're making at the end.

But it's also how much you're spending.

We'll see a project

where we have a budget that we know we can get this done

for half a million dollars and somebody else comes in and they do it for 1.2.

You're blowing money out the window.

How long would it take you...

with a positive cash flow to make back all the money

that you're spending?

I guarantee you, these guys are spending way more than they need to.

So what is it you want to do to the garage and ADU?

[Natalie] We made it a one bedroom,

-um, with a bathroom. -[Drew] Can we take a peek?

-Yeah. Let's take a look. -[Natalie] Yeah.

[Drew] All I care about is

what are the decisions they're making

that are gonna be good for a buyer?

So what we have here is, that is the living area.

Uh, then we have a one bedroom

with a bathroom for the bedroom.

And then we have a secondary, like, powder room

that can be used... that's gonna have double doors that can be used

-just for the backyard-- -[Drew] For the pool?

-You really thought this through. -Yeah.

And then sliding glass doors

-to this little patio for the ADU. -[Jonathan] Yeah.

-Private patio for the ADU. -[Natalie] Absolutely.

[Sean] Because we're putting a basketball court over there.

-[Drew] Oh, really? -[Sean] Yeah.

[Drew] Have you put a basketball court in before?

-Tennis court. Never a basketball court. -[Drew] Okay.

So, right up against the side wall of the property,

you have to think of going

into the neighbor's yard and everything all the time.

There are restrictions for what you could do

-for partitions. -Oh, didn't think about it.

So just a couple of things like that to keep in mind.

What's the timeline on getting this done?

Best case scenario, about four and a half months, we're done.

-Yeah. Worst case, six months. -[both] Okay.

[Drew] Which, I mean, for a full gut and a pool

and a basketball court, all the landscaping

and the ADU that's still in L.A.

That's still...

[Natalie] That is very, very quick.

If you pass 100% of your inspections

and you're just not waiting around--

[Natalie] We have everything lined up.

[Sean] Yeah, all our rough material's already here.

-[Drew] Yeah. -Like, there's no delays.

What... what is it you would actually get from us...

being a part of this? How would we help if we backed you?

[Sean] For me, it's an opportunity to

see things that I will never be able to see.

You're catching things that I need

100 years more of experience to see.

So as far as being more efficient and seamless

and creating the best product,

I think you guys can assist us with that.

[Jonathan] I mean, this project...

Massive undertaking.

-Yeah. -Potentially massive profit.

Depends. We're not in an ideal climate for that.

So that's where you start to really wonder,

you know, where am I overspending?

Am I hitting the market right?

[Drew] You know this area from a real estate perspective.

Your extensive construction experience makes a big difference too.

You guys are very methodical, which is very important,

and those are the types of people that we like to work with.

We'd be honored. [laughs]

I mean, we... We have obviously other houses to look at, and...

we want to make sure we make the best decision for who we're gonna back.

-You've got to pick... you got to pick us. -[both laugh]

-[Jonathan] Why? Why do we have to pick you? -You have to.

It doesn't feel like, you maybe do need us.

First of all, we do need you, and we need you desperately.

To be honest, if you guys jump in and help us

and give us your expertise and help us to finish material,

you actually can save us, you can save our business.

Absolutely. With your expertise

and your ability to help us cut on costs

and know the market the way that you guys know the market,

and we know that you'd be an asset to us.

[Sean] Everything is on the line.

This project, if it's gonna be not profitable,

if we're gonna lose money, that's gonna handicap me

the opportunity to buy more properties.

So that's gonna make us or break us.

-Well, it's been a pleasure. -Thank you so much.

-Thank you very much. -Appreciate it. Thank you for your time.

[Natalie] All right. Thank you.

We have a lot to lose.

Our time is valuable.

We also have a lot of money invested

into this specific project.

If the brothers don't back us,

I feel like we'd be missing out on a huge opportunity.

[Jonathan] That... not what I was expecting.

These guys are really confident.

Although when I looked in and saw this house, I was thinking,

"Oh, no. What's this money pit? What have they gotten themselves into?"

-But at the end of the day, actually, it's not too bad. -[Drew] Yeah.

[Jonathan] She said the one thing that does scare me

is she wants to set the comp with this project,

-which is what somebody always says... -Yeah.

...when they're looking at the numbers

-and they know that they're asking for a crazy price. -Yeah.

But when you're in a market right now, it's not a hot market.

You don't want to be the most expensive home.

Their target is $100,000 over the market cap in this area,

but it's just a tough strategy to be the top price.

Let's see some more houses.

[Jonathan] We're heading back to North Hollywood.

There's a hotbed of property investors wanting our backing,

Our next pitch is from Sheryl and Jasper,

a mother-daughter team with lots of experience,

who are just getting into multi-unit projects for the first time.

That's it. Behind the trees over here.

[Jonathan] Okay. Looks great.

They are partway through construction on a triplex,

but we've heard that progress is at a standstill.

This is a big project.

It's the biggest they've ever done.

So we want to see what their sticking point is, what the problem is.

So far, I like what I see.

Part of the appeal in this area

is that you can walk to shops and cafes.

But when Sheryl and Jasper bought their triplex on a major thoroughfare,

they didn't realize it had commercial zoning.

[Sheryl] We're here developing a four-story triplex.

I've been in the real estate industry for over 30 years,

and this project has been very frustrating.

It has consumed my life.

[Jasper] It's like we're in this cycle of chaos.

The brothers coming in would be life-changing for us,

-Oh. [chuckles] -It looks a lot more under construction from here.

It's deceiving from the front.

-Oh, inside as well. We're all still studs. -Okay.

-Hey. How are you? -Hi. Hello, how are you?

Just hanging out in garages.

-I'm Sheryl. This is my daughter, Jasper. -Hi, I'm Jasper.

I gave birth to my business partner. [laughs]

Walking up, the first thing we both said, we're like,

"That's a good-looking building."

[both exclaim in pleasure]

We have some issues. [laughs]

[Jasper] Lots of issues, actually.

-[Drew] What are the issues? -We've been at this for two years.

-Yeah. -[Jonathan] Oh, two years?

-It's been two years. -Yes.

-Why so long? -[Sheryl] It's a residential building,

but they're treating it as though it's commercial

because we're on a busy street.

Yeah, we have the same building around the corner,

and it's not treated as commercial.

[Sheryl] But that one's an interior lot.

We learned that the property

was turned from residential to commercial.

It was heartbreaking. We had no idea until we started

that we were gonna come up against these extra costs.

[Jasper] It felt like we were dropped into deep water.

We know residential, but this is a new ballgame.

[Sheryl] We've had to stop, get plans approved again.

It just devastated us.

[Jonathan] You said this is a building that you have actually built elsewhere.

[Sheryl] Well, it's under construction. This one's further along.

-Can we look inside? -[Sheryl] Absolutely. Let's go.

[Jonathan] They're all about the same size?

[Sheryl] There's two 1700 square feet,

and then the last one's a little bit larger.

[Jonathan] Okay, so nothing has been done on the inside?

[Sheryl] We're at drywall.

[Jonathan] Oh, so roughing's all done on everything?

[Sheryl] Yes. Yeah, we've had a tough time with that also.

For example, these lighting fixtures?

We installed them, got inspection and had to take them all out.

We had to change them to fire rated? Things like that.

How much have you wasted on this project so far?

-I'd say close to $200,000. -Mmm-hmm.

-200 grand. -[Sheryl] Yes.

What's your... what's your total budget for the build?

It was 1.1 million.

Oh, my gosh. That's like 20%.

How much have you wasted on this project so far?

-I'd say close to $ 200,000. -Mmm-hmm.

-[Drew] Yeesh. -[Jonathan] 200 grand.

What are you bringing to the partnership here,

from experience or family business?

My mom has been doing this since I was two years old.

I grew up knowing that I want to work with my mom

until I studied accounting, real estate.

I just completed a program at USC

for commercial real estate, and now--

-That's amazing. -[both] Yeah.

[Sheryl] She's a lot more organized than I am

and she's trying to get me--

[Jasper] Yeah, but there's so many projects,

and it's just us two that it's hard to be organized.

It's heaven in the beginning,

total chaos in the middle,

and then wonderful at the end.

All of them have been like that.

-[Jonathan] Right. -[Sheryl] And all the bedrooms are upstairs.

Every bedroom has a bathroom.

[Jonathan] Is there a bathroom on the living room level?

[Sheryl] There is the powder room.

So you basically have a bathroom here,

that room has a bathroom and there's a hall bathroom for this room?

- [Sheryl] Yes. -[Jonathan] As long as they're three functional bedrooms.

Once you start to get too small, it's not as appealing.

I can see how long this building's been sitting open.

Have you had any issues with the rain?

-Oh, boy. -It flooded...

-[Sheryl] Two times. -[Jasper] Yeah.

[Sheryl] The deck was not sealed properly

when the hard rains came.

Did that cost you or was it covered?

They only charged me $1500 to redo it because they messed up.

The biggest mistake you could make is just anticipating that

-everybody's doing what they're supposed to be doing. -Oh, yeah.

Yeah. You have to stay on top of it.

If I'm not gonna be on every site every day,

I have to have crews there that I trust.

[Drew] Trusted go-to sub trades.

You have to have those connections as well

if you want to have a successful project.

-This is an incredible space. -[Sheryl] Yeah, I love it.

[Jonathan] This is amazing.

-[Jasper] Yeah. -[Sheryl] Yeah, this kind of sold us on the design.

Uh, are they all exactly the same footprint?

-The last unit is larger. -[Jasper] The last unit is bigger.

-[Jonathan] The one facing the view? -[Sheryl laughs]Yes.

-No matter what, it's L.A. -[Sheryl] It's L.A.

People love having a great patio.

[Drew] This is a huge value add.

-If you're wanting to get top dollar rent... -[Jasper] Mmm-hmm.

...you need to have features like this to compete.

[Sheryl] This project is by far

the most challenging that I've ever done.

If it goes south, it could ruin us.

So for this neighborhood, do you know what the rental rate is?

$5500 for two.

-And then $6000 for-- Yeah. -For the last one.

Does that give you a positive cash flow?

It does give a positive cash flow.

It's about $5,500 a month.

-That covers your expenses, your mortgage payment? -[both] Yes. Yeah.

Eventually, when you go to sell what are you anticipating

your profit could be?

-$900. Somewhere around there. -Yeah.

-How long would you hold it as a rental? -[Sheryl] For maybe a year.

Sell two units and keep one.

Why do you think this is a good investment? Why should we be involved?

Oh, wow. I mean, I thought it was

a good investment because of the neighborhood.

In a few years,

it's just gonna be so amazing here.

-Why would you sell it in one then? -Yeah, exactly.

-You're right. You're absolutely right. -Yeah.

-I think she's afraid of debt. And-- -I am afraid of debt.

I... I went through the 2008 crash.

-Don't be afraid of debt. -[Jasper] Mmm-hmm.

You actually can make a better return

-when you're using somebody else's money. -[Sheryl] Okay.

-Even with the interest calculated. -[Jasper] Yeah.

Can you break down all the numbers?

-So we purchased it for $875,000. -[Jasper] Yes.

All-in, the construction will be about one $1,250,000 or so.

So about $2 million we're into it.

So you're $2 million all in. Anything else make you fearful

that you're not gonna stay under $2 million?

Uh... her spending on the finishes.

She's used to doing these luxury homes in Encino,

putting very expensive things in there.

But I don't think that this calls for this.

I mean, we've kind of been arguing about it.

She tries to reign you in, but you don't listen to her.

-Not at all, she tells me just stick with the numbers. -[laughs]

She's the designer, but I'm like, "The design is part of the numbers."

-You're already $200,000 over budget. -[both] Yes.

-All the finishing touches... -[Sheryl] Right.

-...those are the most expensive parts. -Yeah.

-Why would you need us? What would-- -[Sheryl] Why do we need you?

-Did you just hear everything you just said to us? -[laughs]

Are you kidding me?

-[Jasper] Yeah. -[Sheryl] I mean, my God.

-Yeah. -My whole thought process.

-I've been doing this for a really long time. -[Jasper] Mmm-hmm.

-So just now, of course, we need you. -[Jasper] Mmm-hmm.

We're doing everything from A to Z

and it's just too much. We need help.

-I feel like I've been stuck for years... -[Jasper] Oh, yeah.

...in this place where everything is chaotic.

And there is a next level, and I feel like

I can't get to that next level

-with the way I've been doing things. -[Jasper] Mmm-hmm.

So I really want to learn how to turn that page and get to the next level.

If you had one thing

you could get from us that would help this project?

Project management and organization.

-Yeah. -[Jonathan] Okay. Okay.

-Whether we back you or not... -[Sheryl] Yes.

...if you take any advice away from right now,

you have got to get it done

and get it rented so that you're covering those costs.

There's a lot for us to consider.

Kudos on everything that you've built.

But you're still not out of the woods yet.

-[laughs] -Thank you so much.

-Thank you. Thank you. -Nice to meet you.

-We'll talk to you soon. -Watch those pitfalls.

-All right. -We'll be in touch.

[Jasper] If the brothers don't back us,

I'm afraid that we're gonna stay in this cycle of chaos.

Hopefully they back us.

[Sheryl] Our life savings is in this project.

And it's on the line.

I like that they actually have--

-They're this far along. -[Jonathan] Yeah.

But, the problems they've had that have delayed them.

-That's in the rearview mirror now, so... -[Drew] Yeah.

But the biggest problems could be moving from this point forward

because it sounds like this is where

Sheryl really blows budget continually.

[Jonathan] They could really use a helping hand.

That's impressive, though,

that they've done as many projects as they've done.

She's been doing it since the the 90s, but then,

-she lost everything in the 2000s. Yeah. -In 2008.

[Drew] Hopefully, this isn't the project that puts them back under.

[Jonathan] It's kind of tricky.

It's apples and oranges.

You got Natalie and Sean,

single family, detached home, quiet neighborhood.

And then you've got Jasper and Sheryl

with a multi-family complex

right on a busy highway,

but bordering a great area in NoHo.

[Drew] The design and everything that Natalie talked about,

it sounds pretty great.

They have experience. They know what they're doing.

They know what they're doing. But they're making classic mistakes,

like overestimating what the final sale price could be.

You're kind of pushing

beyond what this market will give, right?

I agree that it's on the high end of the comps.

But no risk, no reward.

I think that Sheryl and Jasper

are making more mistakes, especially Sheryl.

She's been doing this for years.

Yet she's at that point where she's about to start overspending

on all the materials for the design

and really reduce their margin.

She's used to doing these luxury homes in Encino,

putting very expensive things in there.

The only thing I think they're being very realistic with

is what they could rent for.

I do think they could get $5500 a month for those units.

Both of them will get the projects done.

I do feel like

it's harder to maybe get Natalie

to listen to the advice that we're giving.

I think she feels very confident--

But Sheryl's been making the same mistakes for decades.

I can see a stubbornness with both Natalie and Sheryl.

[Jonathan] Okay. I think I figured out

which project would work better for me.

I think I know who I wanna back.

[Jonathan] Okay. I think I figured out

which project would work better for me.

I think I know who I want to back.

I think Sheryl and Jasper.

I agree with you. I think they need it more.

They need us to break through the next level.

That's actually how I feel because there's more potential

for Jasper and Sheryl to fail if they don't have our help.

I expect Natalie and Sean will think twice

about their high sale price now that they've spoken with us.

And they'll find a way to reduce costs

by maybe tapping into Sean's construction contacts.

They'll definitely learn from this experience and keep at it.

But we'll keep in touch to offer advice if they need any.

I think Sheryl and Jasper's triplex

is a great mentorship opportunity for us.

We like working with experienced investors whenever we can.

They just need a project manager. Badly.

We've got Donnie coming off the one project.

I think we should actually have one of our designers

-hop in, too. -[Jonathan] Okay.

-Should we give him a call? -[Drew] Yeah, yeah. Let me just pull over.

[Jonathan] There's a window where we have some incredible trades,

some incredible designers, people that could work

on something else for us before the next project begins.

That's the window where I think these folks can really benefit.

-Hello. -[Drew] Hey.

-[both] Hi! -[Sheryl chuckles]

[Jonathan] We have had a lot of conversation

about where you guys are at, so we want to back you guys.

[both squeal]

Thank you so much!

You're welcome. You're welcome. I'll be honest with you,

one other thing that's really important to us, Sheryl,

are you honestly willing

to stop making the mistakes that you've made in the past

by overspending

and letting Jasper take on some responsibility?

Absolutely. Absolutely. Yes.

Jasper, do you believe her?

- I want to. [laughs] -[Jonathan laughs]

I'm just excited and I really want her to do things

better than I've done them.

So I'm grateful that you guys are going to come in and help us

-turn the page. -Yeah. Thank you guys so much.

We're gonna bring over some of our trusted team to work with you,

project manager, designer, and we'll touch base

when we're gonna get over there.

-[Jonathan] See you soon, all right? -Okay. Thank you!

-[Drew] Bye. -[Jonathan] Bye, guys.

[upbeat instrumental music]

[Drew] We're gonna be supporting these investors in so many different ways.

Mentorship is the first part.

We want to make sure that they can learn from our experience.

Design, we wanna bring ideas to the table that will absolutely

blow the design out of the water and give them opportunity for more revenue.

[Jonathan] They're already 200 grand in the hole,

over and above their original budget.

[Drew] And project management is a massive part of this deal, too.

We wanna make sure that they're organized the way we organize.

We do up to, what, 20-plus houses at a time?

We are very organized.

-Kelly. Donnie. -[Donnie] Nice to meet you.

We have cherry picked the problem-solvers

for the exact problems you have.

-Oh, wow. -Just to show you how much we trust Donnie,

he has worked with us for many, many years.

He actually did the project, managing on my house, my personal house,

on Jonathan's personal house.

And the place looks great. Everything seems to be tucked up

and well put together.

You've obviously passed some inspections,

-and we're not starting from scratch. -[Sheryl] Yes, we have.

It's been brutal, but, yes, we have.

Our first goal is to sit down and see where, design-wise,

what's been established, what's in production.

[Kelly] And you guys are a little bit glamorous,

and if this is kind of an investment property,

-we gotta scale back on the glam. -Okay.

So, I see we're wired for a TV here. Is that the final spot?

[Sheryl] That's not the final spot.

No, the plan was to have the sofa and chairs go this way.

And that's why I wanted a television and built-in that way.

[Kelly] That's definitely the best wall for it,

because having custom built-ins is great. It really reduces the clutter.

And, then, it creates a focal point for leisure activities

like TV, books, games.

[Drew] I agree. This is the kind of living space renters will pay for.

You really need to communicate what that plan is and have that information here.

You know, if we see what the furniture layout is, we would know

-that there's no reason for a TV on that wall. -No reason for that.

I think one thing that we can do is really communicate the information

and have printouts on the wall.

If your subs know the design plan,

they'll know exactly where things need to be installed.

All they need to do is tape a plan up on the wall

and everyone will know where things need to go.

[Jonathan] So, it's a three-bed, four-bath townhouse.

-[Sheryl] Right. -[Jonathan] And you've planned for decent-sized closet space?

[Sheryl] Yes.

[Drew] And were you planning on doing custom vanities and things like that?

[Sheryl] I always do it, but it doesn't mean I have to.

All of the renderings and the things that I'm seeing that you guys have sent over

is very grays and blacks and whites.

Well, that's great because we wanna appeal to everybody.

That design aesthetic, is that both of yours,

-or is that what you wanted? -It's her.

How about yourself? What would you like to see

if it wasn't just the black and white?

I like the black and white, but I do wanna see a pop of color every now and then.

-Yeah. -[Kelly] Okay. Okay.

[Drew] Sheryl and Jasper are experienced investors.

They don't need us to provide a lot of materials,

like some other investors that we back.

[Jonathan] We don't think that would be a good use of our resources.

They need mentorship more than anything.

So, Drew and I are gonna cover the cost of Kelly and Donnie's services

for the next ten weeks.

If Donnie and Kelly can't handle it,

I don't think anybody can handle it.

[upbeat instrumental music]

[Jonathan] This triplex is Sheryl and Jasper's

first ever commercial property.

-Hey. How are you guys? -[Sheryl] Hey. How are you?

-Hello! -Good.

[Jonathan] Meeting some of the code requirements set their schedule back,

and they still have some inspections to pass.

All three units of the triplex are at different stages.

Donnie and Kelly can only be here for ten weeks,

so we're counting on Donnie's project management skills to get this done on time.

[Donnie] So, I noticed that one unit was insulated

and they're coming to inspect that.

But do they do that unit by unit or...

I'm hoping he can look at one

and give us a pass. I don't know until he gets here.

We never know who we're gonna get and what it's gonna be.

[Jonathan] If you wanna get in the real estate game,

you are gonna figure out real fast, fair doesn't exist.

Anybody could come in, whether it's an inspector,

planning department, whatever it is,

and they can change rules,

they can make decisions that impact your bottom line.

[Donnie] In order to hit our critical deadlines,

I wanna help you in three ways.

If one is schedule, which I think you have a very, like, linear schedule.

But it needs to be flexible and lot more detailed

so that, if things move forward or back,

-we can easily adjust. -Okay.

And then, second, we need to amortize materials,

which I know we're going over with Kelly.

Amortizing the materials, I have issues with

because I drywall and, then, I come in and look at it

and, then, I start designing at that point.

But that's not what we should be doing.

It should be done before, is what you're saying?

Especially with this one being so behind schedule

and critical that you guys stay the course for financial reasons

-and for many other reasons. -[chuckling] Okay. All right.

[Donnie] Not ordering design materials until the drywall is up

is a huge mistake.

It can leave your projects sitting for weeks

while you're waiting for product to come in.

-[Sheryl] Hi, Humberto! -[Humberto] Hi, Sheryl.

-[Jasper] Hello! -[Humberto] Hello.

-[Donnie] Oh, we got tile guy. -[Sheryl] We have tile, yeah. We're getting ready for that.

-Got all your measurements? -Yup.

-Okay. So, we'll just tile this wall here. -[Humberto] Okay.

And shower pavement is small tile?

-Yeah, two-by-two. -Okay, two-by-two. Okay.

-Yeah. That, for sure. -Got it.

-And then this wall. Here. -Okay.

We have 13 bathrooms.

How long do you think it'll take?

-One month and a half, something like that. -A month?

-[laughing] Yeah, a month or two. -[Sheryl] Humberto.

Yeah, it's a lot of work.

[Sheryl] How long do you think it'll take you?

-One month and a half, something like that. -A month?

Is there an opportunity to bring in multiple crews and kind of stack them up?

[Humberto] Yup. Yeah, I like that.

Okay. How many crews would you bring?

Eight guys working the four bathrooms at a time.

-Four. So, basically, one unit, one unit, one unit. -One unit, yup.

[Donnie] I think that's a great plan,

which I would say they would come into unit three

-to stake his drywalls further there. -[Sheryl] Right.

So, as we stack them,

-making sure they have enough room to work as well. -Okay.

[Donnie] So, by Monday, we would need to have

-all our materials here and ready for you? -Yup.

So, we'll just have to work with Kelly and get that in our schedule, too,

and have a stack in each unit.

So boom, boom, boom, we can get going.

-We have a meeting with her next. [chuckles] -[Donnie] Yes. Let's do it.

-Okay. -Okay.

[intriguing instrumental music]

[Kelly] I am taking Sheryl and Jasper to a stone yard.

They are way behind schedule with a ballooning budget,

so I really need to teach them how to change their spending habits,

and I need to do it fast.

They're gonna pick out their countertops, and I wanna show Sheryl

how she can still get those gorgeous slabs that she wants,

but still stay within budget.

They have this amazing back warehouse

that I don't think she knew about,

and it's an easy way for us to get that return on our investment

without spending a gazillion dollars.

-Slabs as far as we can see, right? -Yes.

[Kelly] This is not the section that we're going to be purchasing from.

-[Jasper] No? -[Sheryl] Okay.

This section here is the expensive section.

-[Sheryl] Okay. -[Kelly] Natural stone is the most expensive,

so we're not gonna use that.

I absolutely love the back room in the stone warehouse

because it is where you find the best deals.

The same quality materials

-as the stuff we'll find out there. -[Sheryl] Right.

-[Jasper] Okay. -[Kelly] It's just less of it.

-[Jasper] Oh, okay. -So, this has a chunk taken out of it.

So, obviously, we can't use this as a full slab.

-[Sheryl] All right. -Let's just say we wanted to cut it off.

We could use it as an island.

-We could use it as a vanity top if we chose to. -[Jasper] Yeah.

No, that makes so much sense, 'cause we would've definitely just walked right past it.

You know what? I always look for things with imperfections like that.

I like something like this.

-[Jasper] Oh, I like this. -[Sheryl] This one?

I like it, but everyone has this in their home.

This is definitely not gonna set us apart.

You can have five new homes and they all have the same things.

What I want in my properties is something different.

You wanna build for the masses,

-but you also wanna have your own identity. -[Sheryl] Yes.

-And, so, you want something that looks custom... -Yes.

-[Kelly] ...but doesn't have a custom price tag. -Exactly. You're right.

We'll just avoid the stuff that makes it look cookie cutter,

-like that. -Okay. Yes.

Whereas this one right here...

-[Jasper] Ooh! -[Sheryl] Oh!

Well, I think we might have found something.

-I'm loving this. -[Jasper] I love that.

-The colors and the movement, oh, my gosh. -You love this.

-[Sheryl] I love it. Yes. -[Jasper] Yeah.

-When you look here, there's only two slabs. -Okay.

I'm assuming that this is probably all they have left.

-[Sheryl] Okay. -And this is the reason why it's in here.

-[both exclaiming] -Which means this is how we're gonna get the discount.

-Okay. -[Kelly] Slab one.

-[Jasper] Slab one. Okay, we're making some progress. -[Kelly] Okay?

We have three units, so we're using two of these? Are we using one of these?

-Let's use two of those. -Okay.

-So, let's go around the corner. -[Sheryl] Okay.

There's one that looks exactly like this.

-[Sheryl] Okay, let's see it. -[Kelly] And it's also porcelain, which is good.

Kelly has opened up our eyes to a whole new world.

It's gonna make a huge difference going forward for us.

Natural stone is so very difficult to have with renters...

-Right. -...because you have to seal it all the time.

And if you don't do that, then it's damaged.

-But this one, which I saw before... -Okay, I like it.

-...is porcelain. -Yes.

Super durable. A little less busy than the other, which I like.

So, we can do two of the slabs that we found in there.

-[both] Okay. -And, then, we'll do one of these.

-[Sheryl] Yes. -All being porcelain, super-durable,

renter-friendly.

-[Sheryl] It's beautiful. -[Jasper] No, it's perfect.

I think we knocked this back warehouse out of the park.

[all cheering]

I mean, you did so good.

[all] Go to the back warehouse!

-[Sheryl] Got it. -[all laughing]

-All right. -[Sheryl] Going forward, it's gonna be exciting

to give our buyers, or renters, quality

without paying a lot for it.

We're reeling you in, but we're not compromising on quality.

[intriguing instrumental music]

[cell phone ringing]

[Jonathan] Hey, what's happening?

[Donnie on call] Calling with not the best news.

The problems that Sheryl's having

with the conversion between residential and commercial building,

well, they came back after approving her fire sprinkler system.

And the inspector notices that there wasn't the precaution

taken on these shared walls to keep fire from jumping.

The drywall in the first unit was complete.

Now, some of that has to be walked back

and make sure, you know, we've got all the plugs and electrical

wrapped with fireproofing.

So, I'm just worried about timeline.

How much of our drywall do we have to undo?

[Donnie] 20%.

But we are looking at a good three-week delay.

[groans]

[Donnie] We are looking at a good three-week delay on the timeline.

[groans]

[Donnie] It just feels like we're getting a little further and further behind.

[Jonathan] We can't have that, 'cause we only have you for ten weeks.

Then, we're moving you on to another project.

Okay. I mean, that has to get done

if that's what they're calling for.

We are gonna be ready to attack it

from a perspective of having everything on site ready to go.

-Okay, sounds good. Thanks for letting me know. -[Donnie] All right.

-Bye. -[Donnie] Talk to you soon.

[Jonathan] Our ten-week timeline just became 13

while we do all the electrical upgrades to pass inspection,

which is unfortunate, 'cause that's gonna cost Drew and me

to cover the construction manager and designer for that extra three weeks.

We're gonna see this project through to the end.

It's just a mistake that is gonna cost us a lot of time and money.

[upbeat instrumental music]

Do you remember Isabel and James?

They had the vacation property in NoHo.

-How could I forget? -Five kids.

They were a little stubborn. They didn't listen to us

with a lot of things that would have been helpful.

James. Nice to meet you. Thank you for coming.

Our goal with this property was to build an apartment building.

After spending tons of money, the city eventually said no.

And it cost you how much?

-Over $100,000. -Oh, my gosh!

[Jonathan] You did not take our advice.

You framed for five bedrooms. You didn't go for four.

They weren't paying for it, we are.

I was talking to them, and the rental has been totally successful.

Constantly booked up. They've recouped a lot of that income.

They actually were able to pull out a bunch of the money.

And, now, they're in a position

where they have some funds to get another place.

Oh, my gosh, you guys! Incredible!

When we met, their original goal was to find a multi-unit property.

They're already out there looking.

They didn't outright ask for help.

We can't say thank you enough.

-[Isabel] Thank you. -All right.

[Jonathan] But I wanna help them because we just got them

out of this huge financial hole.

I don't want them falling into a new one.

It would be nice to actually be able to give them a little guidance

with what they were actually trying to get into originally,

with a multi-family property.

We're waiting on Sheryl's triplex inspection.

So, if you wanna carve out some time to help them, go for it.

[Jonathan] Sure.

[intriguing instrumental music]

James and Isabel have $345,000 total for a down payment and renovations

for what is, or could become, a multi-family rental with zero zoning issues.

Drew sent some listings, and they've already seen some of those.

But there are two properties that really caught their eye.

With their budget, and being in LA,

they're severely limited on what's out there.

But I'm showing them the property I would invest in if it was me.

This is three units, one bed, one bath in the back.

There's two of those. And, then, there's a studio up front.

1.295 for the list price.

-Why don't we hop in and we'll take a look? -Let's see.

[James] Now that we've come out ahead on that almost-disaster property,

what's really at stake for us with this new investment search

is not getting another dud property.

We need to find one that will make money, not cost us money.

Absolutely. We can't get into that again.

Uh-huh. Wow, okay.

[James] Well, this is a nice studio.

When I think of a studio, I think of the teeniest, tiniest space.

I lived in a studio in South Korea for a year, and I'm not joking,

-it was, like, 200 square feet. -Well, this is much bigger.

So, it's like, this has an actual kitchen.

[Jonathan] Usually, when I come into a building,

I'm looking at something that's gonna rent right away, and rent fast.

-Well, your walkability is great right here. -[James] Yeah.

The size is good. This will actually be quite nice for somebody.

Current comps right now are about $1,800.

The one advantage you have with this building is it's completely vacant.

Whatever you want to target for your rent, now is the time to do it.

[James] What I look for in an investment property

is simply its ability to make money.

I don't care if it's pretty. I don't care where it is.

If it's gonna make money, then that's a good investment.

So, this one's furnished a little bit.

Studio unit was 435. These are 522.

This is the unit that would require a new kitchen.

These cabinets look like they're about to fall off the wall, so...

I mean, we could just paint the original cabinets

and, then, put new upper cabinets. That would save money.

[Jonathan] I would probably keep it in the budget

to do really nice kitchen in here for 30 grand.

I usually end up doing a little bit more up front than I probably need to do

because I like to know that a tenant's gonna come in, have a little bit of pride

in where they live, and they'll stay longer.

I think this is one of those Jonathan suggestions

-that we may not take. -[James] Yes.

-And, then, the bedrooms actually are really nice. -It's sizeable.

[James] Big for this space, yeah.

-[Jonathan] Bathroom is what it is. -[Isabel] Needs work.

[Jonathan] This would be pretty easy to clean it all up and make it really shine.

All right, let's check downstairs.

This property is not necessarily turnkey.

There's still a bit of work that has to happen.

A kitchen that needs to be redone.

But it's not like this is a six-month renovation.

They could get in here, rent some of these units, be cash positive right away.

This one's also furnished.

This actually looks more spacious than the one upstairs.

It's a slightly different footprint. It doesn't have the breakfast bar.

[James] It's a little darker than the upstairs one, being down.

This is a really big couch for the room,

-but it shows you could have all of your friends over. -[Jonathan] Exactly.

-It's a tight kitchen. It's pretty functional. -[Isabel] It's very European.

Yeah. The one thing on a building like this

that I would dive into and double check is,

I'd make sure that there wasn't any unpermitted work.

I can tell there's no hood here, so no inspector came through.

I'd look at the power

and the connections and see how everything was done.

If you started upgrading all of the electrical,

you're looking at another 20 grand.

[James] It's charming, it's romantic, but it needs work.

-We might have to spend too much money on this one... -Too much.

-...and the whole point of this is to make money. -Absolutely.

Overall, the building is in pretty great shape.

Right off the bat, you'd be making about $1,800 for the studio,

and about $2,200 for the one-bedrooms.

You'd be clearing 75 grand annually.

$195,000 down, plus 150 grand into it.

I don't think I'd put 50 grand into it. I would go for as little as possible.

I'm not attracted to the idea of investing money into it.

-If we're gonna buy this, I want to rent it right away. -I agree.

-Hey, hey! Got a minute? -[Drew on call] I do.

So, I just finished touring

James and Isabel through a couple of properties.

-[Drew] Okay. -And I can tell that they're not really listening to me.

They dream up in their head this exact thing that they're looking for

and, then, they're trying to materialize it in the world.

Not how the world works.

You're gonna have to do a little bit of work

to any building that you pick up.

Not how the world works. You're gonna have to do

a little bit of work to any building that you pick up.

[Drew on call] Yeah, honestly, it's fine. I'll get you some more options.

I'll maybe find you one that's a different location,

something a little cheaper, possibly.

Minimal work needing to be done.

[Drew] To each their own, but we'll find something that could work.

If you can find it, I'll tour it.

-[Drew] All right. Ciao. -All right. Ciao.

[upbeat instrumental music]

James and Isabel are hesitant about taking on another renovation,

but they're forgetting that if they renovate now, they're gonna get higher rent

and the value of the building is gonna be higher

if they do ever go to resell in the future.

But, right now, I'm showing them a property in North Hollywood.

This is a five-bedroom, two-bathroom home, with a double garage.

You could walk in here right now, with no money out of pocket for renovation.

You would get about $63,000 a year rent.

But if you're willing to do work, and if you have a little patience,

you could almost double what you get out of this place.

-Double? -[all laughing]

[Jonathan] Okay.

-Wow. -So, pretty good size.

Yeah! You walk in, it's open, you see right into the kitchen.

[Jonathan] The space itself, this is an interesting one.

So, legally, this is a single-family home.

-[Isabel] Okay. -Five bedrooms, two bathrooms.

However, the way it's laid out,

you could actually divide it into two separate suites

by just closing this off and adding a kitchen in the back.

-[Isabel] Wow. -Okay.

That would give you a three-bed, one-bath at the front,

-and a two-bed, one-bath at the back. -That's really good.

[Jonathan] So, for your kitchen...

I think this is an attractive kitchen to a renter.

-It's open to the living room. -[Isabel] For renting, it's quite okay.

[James] Yeah.

Down the hall, there's three bedrooms.

This is a prime example of somebody who has divided up

what was probably, originally, fewer bedrooms.

If you did split this off,

it would be a three-bedroom, one-bath up front here,

-but they are very small. -Yeah.

[Jonathan] This would not work for some people.

Bathroom has had some not great work done.

You can see, they reduced the window at one point.

I don't think you could expect premium rent.

It's not luxury, but it is functional.

-Then, if you go down this hallway... -[James] All right.

[Jonathan] So, this is two beds, one bath down here.

Look at the size of the bedrooms back here. Bigger closet.

[James] Bigger bathroom.

If you rented this as a five-bedroom,

you're only gonna get about 63 grand.

You rent this as two separate suites,

you'd actually get closer to $85,000 a year.

-[Isabel] Oh, yeah. Wow. -[Jonathan] Look at the size of this yard.

-[Isabel] Wow. -[James] And it's low-maintenance.

It could be split down the middle for this unit and for these folks, too.

[Jonathan] There's definitely opportunity here.

My estimate is, you could have everything done legally

and finished in less than six months.

The permits would take the longest time.

These properties that we looked at

have something interesting in the numbers.

They have different risks, but they also have different rewards.

You're getting a lot of square footage for here.

And you're getting bigger units for significantly less money.

-[Isabel] Yes. -[James] Each unit, you can rent it for more.

There's a lot you can do here. North Hollywood is hot.

[James] And splitting it would be pretty easy.

But given our recent experience,

and getting stuck in North Hollywood

with a property that doesn't generate the income that we wanted,

I would not invest here.

I wanna try a better area. I love the Burbank property.

-It's cozy. It's quaint. -[James] It's romantic.

[Isabel] Great area.

[Jonathan] Okay, but do you agree

that you have to spend on some renovations?

[James] I agree. I think we could invest an appropriate amount of money

to make people come in, want to rent it and, then, stay in it,

-and be happy. -It would make me excited to work on it.

It would make me excited to rent it.

-It's a different type of renter. -Yeah.

Burbank, I think, is always going to be rentable.

-And it's Burbank. It's always gonna grow up. -It's Burbank, it's nice.

-[Isabel] I wanna put an offer. -[James] I agree.

I think it's gonna be the easiest to rent and keep renters.

[Jonathan] Exactly. And that's a good thing.

I love it when you guys come together on a decision.

They went with Burbank, which I think is a great decision

because the value there is solid.

Regardless of whether or not they actually get this place,

as a mentor, I feel a lot better

knowing I've given them a little extra guidance.

I feel like James and Isabel have the tools that they need.

They're developing the skills that are critical.

I just hope they continue to understand

the value of spending the right amount of money on their investments,

so they can continue to build their business.

[Isabel] This is what we do for a living, to raise our family,

to spend time with our kids, to spend time together.

It's a risky choice we made.

After feeling for a really long time, defeated,

this is the first time I feel excitement

-for moving on into our next journey. -Ah, yes. Yes.

Whether or not we back an investor, we like to stay in touch.

And we just heard from Natalie and Sean.

Now, we gave them the advice, "Reduce your spending."

Unfortunately, they increased their reno budget by 350 grand,

which means their potential profit, if they sell for 2.9 million,

will only be 400 grand.

So, not bad, not great.

Hopefully, on the next one, they'll take our advice.

Next time on Backed by the Bros...

The size that this project has become, we're nowhere near complete.

We're gonna lose Donnie and Kelly.

They have to move on to other projects.

This is the kind of thing that just really kills a budget.

-[Jasper] We have a problem. -[Sheryl] Where are the closets?

-In all of the units. -Oh, my goodness.

This is our family business, and we've put so much into this.

I'm nervous to really see if it delivers what my dream is.

Whoa.