Property brothers Jonathan and Drew Scott have a tricky client on their hands on the latest episode“Backed by the Bros.”
In the episode “Loose Cannon,” the client, John, is a 21-year-old social media devotee who paid $1.35 million in cash for a run-down bungalow in Venice, CA. He wants to renovate the main house, plus the garage in back, and use it for a short-term rental property.
“I see a little bit of us in him, back when we were 21 years old, ” says Drew fondly, referring to their first renovation.
But the nostalgic fest doesn’t last long. John quickly makes it apparent that he’s willing to accept their services, materials, time, and advice, but he’s going to do whatever he darn well pleases, no matter what the brothers advise.
“I like this guy, but I want to strangle this guy,” says Jonathan after weeks of delays and overages. “All of my fears have been realized. We looked at the same plans, we approved it, John approved it, and now he’s changing it. I’ve never seen this before.
“This is quickly becoming the most difficult project that we’re working on, because our investor is changing things last minute or adding things on that throw everything into chaos,” he continues.
“Every time we think we know where this project is at, it changes,” adds Drew. “He’s so focused on making this the best property anyone has ever seen, he’s not even paying attention to the stress that he’s causing us and our trades and everybody who’s trying to make this happen.”
You learn a lot about what not to do in this episode, but you also get a lot of great tips for what works best.
Adding a second story probably won’t pay off
John wants to put all the public living space on the first floor and add a second story for the bedrooms.
The property brothers are not in love with this idea.
“My concern is, if you’re still gunning to add a second story, well then what happens to all the work that you’ve already done on the main floor?” asks Jonathan.
John spent more than $100,000 renovating the first floor before the property brothers came aboard.
“The numbers work without having to add a second story,” Jonathan says. “There is plenty of room to bump out the back for more bedrooms. Adding new footings and structure can be extremely expensive.”
“Our plan is you would just have the single story with the garage converted. You don’t have to go up,” adds Drew.
John can get tens of thousands more in rent by improving what he’s got and renting it out quickly, without adding a second story, Drew explains.
“A second story would be great, but that will add time and cost to your project,” he says.
Against the property brothers’ better judgment, John decides to reinforce the first floor so that he can build a second story at a later date. This puts the project behind several weeks and costs him tens of thousands of dollars.
Create outdoor zones
There’s some nice backyard space between the main house and the garage.
“If you want to add value in this space, I think it’s about creating zones,” says Jonathan.
“We could create an outdoor dining space,” he says, as well as an outdoor water/feature hot tub in the corner where it’s more private.
They also want to add a lounging area with a fire pit and a sauna. The Scotts think these expenses will pay off.
Don’t be overly focused on elaborate details
John wants to add crazy-pants features so the photos will attract renters, and they’ll leave fabulous reviews with photos. He’s convinced that if he spends a lot more, short-term renters will spend a lot more to stay there.
He wants to add a waterfall photo wall and big metal Zs all over the property signifying “Zen Venice” or “Zenice,” and he insists on a glass garage door wall, even though it must be custom-made and holds them up for weeks.
“Going the extra mile and spending more than other hosts will earn high enough reviews to where the return will be worthwhile,” says John.
Drew knows better.
“I hope you’re right, I really do,” says Drew. “You are making a lot of the same mistakes that we made early on, and it bit us in the butt because we realized hopeful thinking didn’t pan out. The added amount of time it took to regain what we were spending—it wasn’t worth it.”
Incidentally, a search on Airbnb shows that, after four months on the site, there are no reviews at all yet.
Use a professional photographer
This is great advice for anyone who thinks they can just walk into the house you’re selling and click a bunch of listing photos with your phone.
You need to think about focus, lighting, placement, etc. If you want buyers or renters to take you seriously, you need a professional photographer.
John certainly knows the value of good photos and is more than happy to accept the brothers’ offer to send in their professional real estate photographer, whose services are worth $1,000.
“It’s going to make the property stand out, and it’s a nice way to finish this project,” says Drew, noting that is one expense you’ll get a return on.
Just say no to the ‘micro closet’
As Jonathan and Drew tour the finished home, they notice one very strange thing in the primary bedroom.
“Wait, wait, wait! What? That’s it for a closet?” asks Jonathan.
“It’s a micro closet,” explains John. “Because the primary use isn’t long term, I think people can deal with it.”
“We’ll see when you start getting feedback,” says Drew. “I wouldn’t be happy with that.”
John’s expression tells you he thinks he knows better.
When everything is done and dusted, John has spent about $88,000 in overages and has invested over $2 million in the property.
He sits down with the property brothers to talk about the return.
“Let’s be a little conservative. Let’s say you can get $600 per night, $170,000 per year. That’s not bad, but because of your overages, it’s going to take longer to make your investment back” says Drew.
“I don’t think it matters at the end of the day,” says John smugly.
“Oh, it matters, because it’s bringing down your return,” Drew explains, telling him not to forget that without their $150,000 investment in materials and services, it would have taken him even longer to recoup his investment.
Shortly after completing the project, John posted his rental online for a minimum booking of 30 days, at a range of $25,000 to $30,000 per month depending on the month.
“Wow! That is a bold and unexpected move,” says Drew.
Nice work if you can get it.
Apparently, John couldn’t. Four months later, the Airbnb listing indicates that John is now renting his Zenice Beach House out for a minimum of two to three nights at a time, at rates averaging between $600 and $700 per night—and it’s not booked even close to 50% of the time.
We suspect he’s wishing he would have listened more to the property brothers.
