This just cost me $100,000 ...

What's up you guys? It's Graham here. So, it's been about two weeks since I posted an update on the status of the home renovation, and yeah, geez! This is the episode that I'm sure everyone has been waiting for.

Remember how I mentioned in the first video that renovations always cost you more money than you think it will, and you will always go over budget? Well, yeah. I've already gone over budget. Way over budget—way more than I was expecting! This is now going to be costing me over $100,000 to make it look good again.

So, I'm going to be breaking down exactly how much this is going to be costing me, how I'm planning to scale back on a few things to save a little bit of extra money, and then I'm gonna answer the question that everyone wants to know: What is going to be the ROI for a renovation like this, and how much it's going to be costing me? And also, how can you smash the like button for the YouTube algorithm if you have not done that already? Seriously, it really helps out a lot! So if you wouldn't mind just gently tapping the like button, it really helps out.

And with that said, let's get into the video! But first, let me bring everyone up to speed. I bought this place with a tenant who had been living here already for over ten years, and by the time I took it over, the unit was in pretty much original condition, which is basically another word for “it's a disaster” and needs a lot of work. Well, those tenants left about a month ago, and that left me with a unit that needed an entire overhaul.

Unfortunately, it really wasn't as simple as just replacing carpets and slapping some paint on the wall and then calling it a day. This unit is located in a pretty desirable part of Los Angeles, so in order for me to get top dollar, it needs to be done correctly and done the right way. Really, in order for me to do that, I had to rearrange the entire floor plan, add in another bathroom, replace all of the ceilings, and replace the kitchen from scratch because the last one was just a no.

But as we got behind the walls, I started realizing that things were going to be costing a lot more than anticipated. First, there were a few windows throughout the unit that needed to be replaced. Some of them are being replaced with a sliding glass door anyway, so it didn't make much of a difference, but others were not factored into the cost, and that begins adding up.

Now, you might have noticed since my last demolishing video that it doesn't look like a lot has gotten done, and that's because it hasn't. All of the workers took time off for something called the holidays—I think they call it. I'm not too familiar with the concept; just kidding.

But in addition, things have been a little bit slow to get ordered in between the time between Christmas and New Year, so not much has really gotten done. So besides it now looking a little bit more open, and now officially we don't have the bathroom anymore, otherwise it looks the same. Although on the bright side, we used that time to finalize all of the permits for the upcoming work, so hey, that's done.

So with that, of course, comes the most important topic of this entire video, and that is budget—how much this is going to be costing me. Because already, this is going to be costing me over $100,000, and I'm gonna break that down for everyone to see. Now, keep in mind, originally, I set my remodeling budget around $65,000 just knowing it was going to end up costing more than that—more like $85,000 by the time it was actually done. Because now after doing five renovations, I just always assume things are gonna cost more than I expected to and take twice as long to finish.

Although this one, I admit, I underestimated a bit too much. Even with my final $85,000 estimate, I was off. And geez, where do I even begin? At first, we have some of the smaller costs, like this lovely port-a-potty to go out front. See, I said we could just cut costs by having a five-gallon bucket with grocery bags, but no, apparently, there's something called, like, "it's not sanitary" or something like that. So, porta potty it is! Just kidding, just for the record that was a joke.

So anyway, the porta potty is $175, and then after that, it's $112 a month just to sit there, or should I say just to “be there”? And then we have the cost of demo to get this place looking as amazing as it does today, and so far, that costs $4,000 in labor and $1,000 in dumpster fees, and we're also still not done with trash removal either, as you can see from all of this. So, we're probably going to need about one or two more dumpsters left after this to clear everything out.

And then we got the other bigger, more expensive items on this list that really make up the bulk of the $100,000. Now, the first is materials, and it's estimated that it's going to cost about $10,000 for things like framing and drywall and so on. Now, I agree this seems a bit expensive, but we're putting some padding in this just to make sure nothing goes over budget beyond this.

And then after that, we get to the real expense of this entire job that I grossly underestimated, and that would be the cost of labor. Now, here's the thing: Good labor is not cheap! Doing something like this is not as simple as hiring random people off the street and then paying them $15 an hour. On larger projects like this, it's so important to get people who are licensed and insured. That means they get workers comp; they're covered in the event anything happens, and they're licensed in their trade to make sure everything is done correctly.

Because of that, it adds up to the tune of about $50 an hour when you account for the cost of management, payroll, insurance, and everything else. Plus, the contractor I hired has to make a bit of money on top of that, so that's about on par with what to expect. And that was honestly way higher than what I anticipated and one of the reasons it went so much over budget. Because in total for this entire project, I'm looking at about $40,000 worth of labor alone.

Yes, this is a lot, but at the very least, I get the peace of mind knowing it's all gonna be done correctly, it's all done to code, I don't have to worry about any issues, and it's all just gonna get done.

Besides that, a lot of my other costs were about on par with what I expected them to be, except a little bit more. Like, for instance, I have $9,600 allocated toward this kitchen, plus an additional $3,500 worth of appliances. So, just right here where I'm standing is $13,000. I also have another $3,200 allocated toward building out this bathroom right here where I'm standing, plus another $2,000 to be spent on tiles and installation. So, right here is another $5,200.

The master bathroom is another expensive area, and while I'm trying to get the cost down, I'm looking at about $5,500 worth of materials to make this look really nice, plus a little bit more for the cost of tiling, but we'll see where that ends up, and I'm hoping it's not that bad.

In addition to that, we also itemized the cost of everything and added it up, and it's just too much to list. This includes the cost of building out the laundry area, buying new doors for each of the rooms, installing recessed lighting, building out the closets, all the hardware associated with that, and then the designer fee on top of that.

So all in all, after everything was itemized line by line, we came to a grand total of just over $100,000. Now, of course, if you know me, I'm gonna pay close attention to where every single dollar is allocated and try to stretch the budget as much as possible. But also, I have to pay close attention to the value of my time to try to see the bigger picture of where my time is best spent on getting the highest ROI possible.

And here's the thing—and really what I haven't experienced before—now, because in the past, I would have managed an entire project like this myself. I would have met with different contractors personally, I would have priced them out individually, I would then go to meet with subcontractors, I would have then gone to purchase everything myself individually, and then monitor each and every job to make sure it was done correctly. That is what I have done for my last five renovations, and as fun as that was to do, I gotta say it was a grind, and that was a lot of work!

This is really the first project where I've realized that, like, wait a second, me going to Home Depot twice a day to go and pick out paint samples is probably not the best use of my time. Going and meeting with subcontractors is probably not going to save me the most amount of money as possible if I could just go and use that same time on other higher-yielding opportunities elsewhere.

Managing a project is not going to cut costs if that ends up taking my time away from something else that is a better, more higher-yielding opportunity. And in the past with other renovations, I would just work myself to the ground. I would stay up as late as I needed to, I wouldn't sleep, and I would cut back on anything else that wasn't as important so I could spend my time doing that.

But now I'm finding myself with literally zero free time! So every hour I spend managing this takes my time away from something else I need to be doing. It’s almost like thinking to yourself, do you want to make $100 an hour over here, or $20 an hour over here? And you can only work 14 hours—what do you want to do?

So that's why going into this, I really had the full expectation of trying to streamline this process as much as I possibly could. And even though I'm heavily involved in the design and creative aspects of this, I made sure to hire a really good team that would cover as much of the day-to-day coordination of a project as possible. That way, I could still keep an eye on the project but still have time left over to do everything else I need to without missing an upload on YouTube and letting anything else fall to the side.

And I gotta say, it is nice to let somebody else take the responsibility off of my shoulders! Even though it costs more money up front, it should save me way more time that I could spend doing other things, like trying to get you guys to smash the like button through the YouTube algorithm and trying to find another property to buy. Stay tuned on that one, by the way! I'm hopefully getting a little bit close, so just keep your fingers crossed, and I will keep you guys posted.

But anyway, in terms of my ROI for a project like this, even though I'm spending more money than I originally thought, it's still pretty good. Like if I just went in to replace the carpet, slap some paint on, and maybe spend $15,000 total on everything, I could likely get about $2,200 a month without any issue whatsoever.

However, if I went all the way like I am doing now and spent $85,000 more than that, I could likely get between $2,800 and $2,950 per month or more depending on how the rental market is by the time this unit is going to be ready. That means an $85,000 investment can make me $600 to $750 a month more in excess cash flow, which still works out to be an 8.5% to a 10.5% cash-on-cash return on my money.

Because honestly, there's no sense in just doing the bare minimum, trying to get a tenant to move in as quick as possible and then calling it a day. As a landlord, I would rather things be done right! I would rather get the best tenant possible, and I'd really like a tenant who appreciates all the work and money that goes into making a unit as nice as it will eventually look and really takes care of it as if it's their own.

And to do that, I have to make it as nice as I possibly can. And then finally, one more thing I want to address: A lot of people have been mentioning that these videos will just end up paying for the renovation, and trust me, if that were the case, that would be absolutely amazing!

But for some reason, I'm still trying to figure this out—these renovation videos have a really low CPM, which means I don't get paid a lot of money on these videos compared to anything else that I do. For anyone who's wondering, these renovation videos make me about 30% to 50% less money than if I did an investing or credit card video, for instance.

So in terms of me using my time to make all of this money back, these videos aren't really the best way to do it. Instead, I make videos like this because I really have a lot of fun covering the intricacies of real estate investing and being able to show you guys the process between turning a place looking like this into something that hopefully looks amazing.

Plus, I get a lot of personal satisfaction from fixing a place up and then handing the keys over to someone who really enjoys it and wants to live there. Plus, it's really cool to see how many of you guys enjoy watching the process come along, and we could all be a part of the journey from the way it looks right now to hopefully how it will look in about two to three months from now.

Making these types of videos is really exciting for me and gives me a chance to make other content that's just a little bit different from my normal investing, credit card, stock market, real estate investing normal content. So well, yes, the views I get do bring in money that I then just go and reinvest in real estate and remodeling videos like this, it's definitely not as much revenue as if I was in my garage talking about investing or the best credit cards to get or how to smash the like button for the YouTube algorithm.

So at least from this perspective, I do make a little bit less money, but I enjoy it! It's really fun, hopefully you guys enjoy it too, and that's the entire point of the entire channel. So I think that should cover all of the current questions that you guys have had here in the unit. Expect another two to maybe three more months, and this unit will be done.

So if you guys haven't already, subscribe to make sure to do that down below so you don't miss out on any further updates here on the unit. And also, if you guys have any other questions you want me to address and answer, make sure to comment down below! I will read them and then answer them in the next video.

Expect to see that video, by the way, in probably another two weeks when more is done here, and there's something else to show you guys. So with that said, you guys, thank you so much for watching! I really appreciate it. As always, if you have not already subscribed, make sure to subscribe and hit the notification bell.

Also, feel free to add me on Instagram; I post it pretty much daily. So if you want to be a part of it there, feel free to add me there. And also, my second channel, The Graham Stefan Show, I post there every single day I'm not posting here. So if you want to see a brand new video from me pretty much every single day, make sure to add yourself to that.

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Enjoy your two free stocks, let me know what you get! Thank you so much for watching, and until next time!