How I made $150,000 in 4 months just by buying and remodeling this property (step by step)

I would basically just try to find undervalued properties in undervalued areas where I can hit them on both ends of the spectrum. So, not only am I buying a home in an undervalued area, I'm buying an undervalued house in an undervalued area. So, I can fix up the house BAM! Brings up the value, area is getting better, under appreciated boom, value goes up on that. So, I hit them on both fronts. So, I could get not only the value from improving the house, but also the area is improving just as rapidly.

So that's what I tend to focus on. What's up you guys, it's Graham here. So, as many of you already know, my main job and my main priority and my main focus is working as a real estate agent here in West Hollywood. Now, in addition to that, what I do is I save all my commission that I make working as a real estate agent. I buy properties on the side, I fix them up, and I rent them out.

So, I will share with you guys exactly how I made over a hundred and fifty thousand dollars in equity in just a few short months by buying this duplex and renovating it. And by the way, what I'm doing here isn't like revolutionary. It's not something that's extremely complicated and I'll walk through with you guys exactly what I do, how I find these deals, what I look for in a property, how I renovate it, how I do everything from A to Z. I'll go over everything with you guys because it's pretty simple to do and there's nothing too complicated in this.

I've been doing this on the side since 2011. The first place I bought for sixty thousand dollars, I put twelve thousand dollars fixing it up and now it's worth about two hundred and thirty something thousand dollars. I did that three times throughout 2011 and 2012, and then I did it again about eighteen months ago. I bought a property in West LA for about eight hundred thousand dollars and I spent almost $40,000 fixing that up. Again, very simple cosmetic renovations that anybody can do. Any contractor can do.

I'm sure if you went on YouTube and Google like how to lay down tile and how to do every place for, it was like very simple stuff. I'm in it about eight hundred and forty thousand dollars and that home is now worth over 1.1 million dollars. That is over two hundred and sixty-five thousand dollars in equity that I've made in eighteen months doing something that's really not that complicated.

So, even though this two hundred sixty-five thousand dollars of equity isn't necessarily that I can go and like spend tomorrow, it is something that I can refinance, pull that money out entirely tax-free, and spend it as though I just made that money. And again, without paying any taxes on that. But I don't want to get too off-topic and talk about that one because I want to specifically talk about this duplex and how I made over one hundred and fifty thousand dollars in just a few months by this place.

So let me give you just the dirty numbers first. I bought the duplex for five hundred and eighty-five thousand dollars. I didn't spend about sixty-five thousand dollars doing some basic cosmetic upgrades and landscaping. So I'm in this place about six hundred and fifty thousand dollars now. The market value of this place is not six hundred fifty thousand dollars. In fact, a place sold just like a few houses down from the duplex. It sold over six hundred and fifty thousand dollars for the exact same condition I bought mine in, with two protected rent control tenants in there that you can't kick out.

At the very least, like my place, with all the comps considered and everything else selling in the area, is worth about eight hundred thousand dollars. Now keep in mind, I mean it's six hundred and fifty thousand dollars, it's worth $800,000 and I've made a profit of a hundred and fifty thousand dollars in just a few months from buying this place. Now, it gets just a little bit better than that, but I expect this place to be worth over 1 million dollars in the next five years.

So, by that logic, I expect this place to go up in value about forty thousand dollars per year in appreciation over the next five years. And I base that off of my last ten years experience in real estate, what other areas have done that I've grown up in and that I've seen, and based off all the construction and all the development that's going around this specific area.

Now my plan is eventually to refinance this, pull the equity out. Again, this is tax-free because the equity you pull out from your property is treated as a loan and not as income. So, you don't pay taxes on a loan that you get; you only pay taxes on income. And because pulling out equity is considered a loan and not income, even though you're pulling out maybe more money than you have in the place or that you've ever invested in it, it's considered a loan, it's not income. There you go.

So I can pull out as much equity as I can from this place, basically cashing out without paying tax on that. And this is just what I enjoy doing on the side. It's not something that's a full-time thing for me; it's something that I really enjoy doing. It's just a side thing for me that I really have a lot of fun with because it's this creative side where you go and can pick a place and see the potential in it, and watch it come to life and fix it up and really make it your own.

It's like you put your own stamp on a property that is just true to you and that's what I absolutely love about it. And that you can happen to make money with it at the exact same time, so I love this.

So here's what I do from beginning to end, and maybe you can start to replicate this. I look at areas that I see that are next to other up-and-coming areas. So the duplex I bought is in West Adams. Now, I noticed Culver City is getting really expensive and the reason I bought in Culver City before was because I saw Mar Vista getting really expensive, which was because Venice and Santa Monica were getting too expensive.

So I noticed the price increases tend to move slowly inward and I noticed development were slowly on the outskirts of these areas as they got priced out, moving, you know, close to the beach. They started moving outwards. So, I tried to find these areas maybe a few years before I really think they hit. And for me, the area that the duplex was in was maybe about two years before I really felt it was going to hit.

So I figured out which area I thought was going to hit first and then I looked at properties that were coming on the market. I would scour the market every single day for properties that came online. Now, it's not as time-intensive as it seems. Two things, I mean first of all, because I'm working as a real estate agent, I would be doing a lot of this work anyway. So for me, it's really not that much time out of my day.

But I set up a notification from the realtor.com app, or you can also use the MLS or Zillow app. I mean there are plenty of apps out there, websites out there, that any type of property came on the market within a certain radius, it would email it to me. So I had my whole template set up and it was basically I wanted something within a few blocks of the Expo Line, which is basically a train running from downtown Los Angeles to the beach.

So, I knew that that train was gonna bring a lot of business and a lot of development to those areas just right around it. I think that as traffic gets worse, more people are gonna want to use that train. A lot of younger people are using that train and where younger people tend to go, businesses tend to go and the areas tend to improve.

So I wanted to be within a radius of that Expo Line. I also wanted to be within a certain price range. I think I was looking between four hundred thousand and nine hundred and fifty thousand. So I really didn't discriminate anywhere between there because I felt like there were just as many good deals at four hundred thousand as there were at nine hundred thousand dollars.

I wanted whatever was in that range that needed work. So as soon as something would come on the market, it would email to me. Within maybe a minute, I would check my phone, I get this notification on my phone, I check it, and I check out the pictures of the property and then I look at it on Google Street View. I check out the area.

I do not want a street with street lights on either end of it. That was a big one for me because street lights mean more traffic and I do not want a street that ever gets through traffic. Never want that for resale value; it always kills it. I wanted to be on a really quiet street.

I also wanted a property that needed cosmetic work but that the bones of the house were okay. The upgrades I like to focus on: floors, paint, landscaping, kitchen, bathroom, other little minor things. These are the easiest things to do and these are the ones that pretty much any contractor can do.

I would basically just try to find undervalued properties in undervalued areas where I can hit them on both ends of the spectrum. So not only am I buying a home in an undervalued area, I'm buying an undervalued house in an undervalued area. So I can fix up the house BAM! Brings up the value, area is getting better, under appreciated boom, value goes up on that. So I hit them on both fronts.

So I can get not only the value from improving the house, but also the area is improving just as rapidly. So that's what I tend to focus on. And you basically just try to bring this place up cosmetically to a level where you can get the full value out of it for the area.

So, West Adams for instance, I'm not going to do marble floors with like stainless steel Viking professional appliances because I know that's over developed for the area. But you do, I would say a little bit nicer than what the area commands and what normal is for the area. And that way, in five years from now when the area has appreciated, what you've done on the property and what you spent on the property is gonna be on par with that because I see so many landlords and some of the owners cheaping out on everything they do.

They use this everything and it shows, and these are places that don't get a premium. That's what makes the rental stand out and that's what also helps get it rented. And by minimizing downtime of the market, you end up making more money, so these things always end up paying for themselves.

The landscape is one of those things that I feel like a lot of people just don't pay attention to, but it's one of the small things that makes a huge difference. And what I'm noticing now too, especially as a real estate agent, the really well landscaped property sells quicker for more money. And it could be something where even if you spend $20,000 on landscape, it can make a $50,000 price difference.

And that's one of the things too that I put a lot of money in landscape on the duplex. I think I spent close to ten thousand dollars just on some minor landscaping, planting ficus trees, doing a fence, doing decomposed granite in the backyard. Like little things like this make a huge difference long term.

A lot of this stuff is very easy to do and is not too time-intensive. It's not like you're going and adding like an extra 300 square feet to something or rearranging a floor plan. That stuff is involved, it's expensive, and usually doesn't have the ROI that just a simple cosmetic remodel does.

No, it is very important, by the way, to see as many homes as possible so you know what a good floor plan looks like. And do not get a place with a really bad floor plan and expect to do a basic cosmetic remodel to it and expect that to get the highest ROI. You need to hold out and wait for the property that is otherwise perfect, but maybe it's stuck in the 60s, maybe it's a little 70s, maybe it's got too much carpet in the 90s.

Things like this are very easy to fix and things get outdated anyway. Every 10-15 years it's gonna look outdated, so it's just a constant refreshing of what the property is. It's a lot of very disservice level things that make a big difference.

No, I'm just assuming everything else about the property's good. I'm not talking about a house that's just like about to fall over and collapse, but meanwhile you put this like banger kitchen in there. I'm not talking about that; like the house should otherwise be in great condition, the fact that maybe it's a little bit dated.

Now, one of the things other people don't talk about is finding these deals. Now, it took me six months to find the duplex that I bought. It took me a while. Now finding a good deal is not easy because the problem is that everybody else wants the same deal you want. If you find a great property out there, chances are twenty other people are gonna be looking at that property and wanting it.

When my place came on the market, it was five hundred eighty-five thousand dollars, and I knew immediately this place is worth six hundred and fifty thousand dollars. I knew immediately just because I've seen every other house on the market. I've been in real estate for almost ten years now and I know the value of the property and note it's worth.

The seller did not know what it was worth and the agent didn't truly know what it was worth. So what I said is let's get this offer signed immediately. I will write you a full price offer of five hundred and eighty-five thousand dollars tonight. Did it, accepted it. Tonight, I will open escrow tomorrow and I promise you I'm going to be closing in 30 days. They signed it. The next day, they got offers way over mine that were cash. My offer was not cash. They got cash offers way higher than mine because that's what the property was worth.

Meanwhile, I'm tied in escrow, I'm locked in, signed - under contract at $585,000 and they can't back out. Done. That's how I just got the deal. And a lot of people talk about that the money is really made when you buy and not so much when you sell, and this is really only half the equation here. Yes, if you get a really good deal below market value, obviously you've made some money here. But it's not the entire picture.

For instance, yes if I bought this at $585,000 and it's worth $650,000, sure that means I just made $65,000 in equity just by buying this place, just by closing on the deal I made $65,000 in equity. But you also have to consider that I made almost eight hundred thousand dollars in equity by fixing it up in an area that's up and coming.

So even though I got a below market value, it doesn't always mean that just money is made when you buy and out when you sell. Certainly don't overspend on a property because if you spend too much money on the property, it just eats away at your profits. But even if you buy a property for exactly what it's worth, you could still make, you know, on this deal, I don't know, like eighty-five thousand dollars just by fixing it up, assuming I spent what it was worth which is six hundred and fifty thousand dollars.

So it's not the entire case in real estate; you have to look at so many different things to calculate what you really think a deal is gonna yield. It's not so much how much under market am I buying it, that's a good component of it. It's a pretty much almost guaranteed rate of return just by buying it below what it's worth. You also have to look at how much is it gonna be worth when I fix it up again. That spread is gonna be your next return.

And then also, what is the area doing and what is the area gonna be worth in X amount of years? That's your third return. So you have three different returns here and if you can hit all three of them BAM, that's what I, when that happens, like, you know, hats off to you guys, amazing well done. That is the goal. That's you know, knock on whatever, that's where I have done for every single one of my five properties. I've hit them on all three. I bought them below market value, I fix them up in areas that are up and coming.

That's my specialty, that's what I love doing, and that's what makes it fun for me. I also see this as almost something that's almost zero risk when you buy something like this that needs work because even if the market goes down in value, which I think it is due at some points to stop going up these crazy levels, I think at some point it needs to stagnate. I think at some point it needs to maybe go down a little bit at some point, who knows when that's gonna be.

But even if that happens, because you're adding equity to the property, even if you're spending money on the property, the market's going down, by you fixing it up, chances are the worst-case scenario possible is that you just break even. So the way I see it is that worst-case scenario in the short term, I break even for the amount of money I put in a property. Worst-case scenario, it's worth what I have into it. So it's not like I'm gonna lose anything.

And on top of that, like I'm a real estate agent, so I like, I would have a lot of this searching and work anyway. I don't even consider it work and for me it's fun. Like I like the challenge of trying to find these up-and-coming areas. I like the creativity of picking the finishes and what you're going to do to a property and how you're going to transform it. It's also, it's like you put your own stamp on a property that is uniquely yours, and it's also finding the grapevine.

It's like this fine balance between what you spend on a property and what you can get for it. So that is it you guys, that is exactly what I look for, exactly step by step what I did, exactly how I made about a hundred and fifty thousand dollars in equity in just a few months. And I really hope this was helpful for you guys for me to be able to walk through exactly what I do, what I look for, how I find these deals, exactly what's involved in my thought processes behind it, and I hope that is helpful to you guys.

Now if you again made it all the way through, and I said this in my 9 to 5 video, 33 minutes and I'm like if you guys made it all the way through and comment down below that you watched the whole thing, I'll respond to every comment. And I'm still responding to every comment. I got almost 2,000 comments on that video and you know you guys like honestly, if you make it through to the very end of my videos I am honestly extremely grateful for that.

So I want you to know that if you have any comments, let me know down below, any topic suggestions, whatever please let me know, I'm all yours, and thank you guys again for watching. Now if you've watched again all the way through and you haven't subscribed, what do I have to do to get you to click that subscribe button and smash that notification about so you know when I upload videos? Because if you haven't subscribed yet, just clicking that little button, by the way, like is a huge support to you know, me and the channel and everything.

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And by the way, this is why I prefer buying these properties and holding them long-term than going and flipping them. So, even though I am in it for 650 and I can sell it for 800 thousand, if I sold this place for 800 thousand, I would have to pay commission on that — let's call it forty thousand dollars worth of commission.

So already right there, my profit is from 150 to 110. Not only that, but then I'd have to pay tax on that one hundred and ten thousand dollars, which in California — Thank you California and thank you to my tax bracket — almost half of that would end up going to the government in taxes and self-employment tax and it's bad, it's bad.

So anyway, that would leave me with about fifty-five thousand dollars left over. So, what I'd rather have fifty-five thousand dollars after paying taxes on that for me to do whatever, or you just go and refinance it. I can pull out eighty percent of the one hundred and fifty thousand dollars of equity right there, completely tax-free, to go and use whatever I want.

And the interest I pay on that is tax-deductible if they don't pass this new tax plan. Again, going off topic on this, that would limit your deductions to the first five hundred thousand in terms of what you can write out for the mortgage interest. That I will save for another video. But besides that, I mean you could see the advantages of going and buying a place, keeping it, refinancing it versus buying a place, fixing it up, flipping it, and then paying tax on that.