Supercharge your cash flow with an ADU

0:00A lot of people are buying these sort of prefab tiny homes you know those are like all the rage where they build them in a factory and deliver them is that something that you recommend or do you recommend it's better to just build something on your property so again from a government perspective I'm like give people options right and so people will pick the best options for themselves tiny homes what I will flag for consumers is like hey these aren't always built to the code of a home like it it says house in it but it's not it could be it could be built to ant standards ANSI it could be built as like a park model RV it could be a motorized thing it could be a lot of different standards and so make sure you know what you're buying and what and that you can do what you think

0:48You can with it and you do that by getting the specs from the supplier or the vendor and bringing them to your planning department and saying like hey Will I be allowed to put this on my property and what would this would the process actually be like and a lot of the time the planner just tells you like that's that's going to be more complicated than just building something on your property for what you want to do yeah but having said that all those caveat the side I love tiny homes I think they're they're an extra option right and they're a very light cost option which is what's missing right now so if if you look at a place like Portland again where they've adopted really light barrier to entry to set you can get a permit for a tiny home hookup so like you just go and put down a pad for the

1:36Camper or the tiny house you put in utility water hookups I forget what they do for plumbing but but in any case you can you can do that really light and for you know a very small amount of money for a figure budget you have a property now and you go online and you say if you've got a tiny and you're looking for a place for it I have a spot in address and you've got utility hookups and this is here's the rules and and now you've got a tenant and that's a really great way for somebody to add value to their property and then they can always develop a structure in addition to that or instead of that or you know like there's it's just another option and from a housing perspective like I I acknowledge that tiny houses cannot be a large percentage of the solution because they are

2:24Not very flexible forms of housing I mean they're flexible and that they can move sometimes but they're they're not flexible for like large families they're not flexible for seniors we have a real aging and place crisis looming where everybody wants to retire where they live almost but basically nobody lives in a house that's ready to age in place that's just not how we've been building for the past few decades so adding adding tiny homes is not going to solve that problem what it does though is it takes y usually young people who are willing to live in a tiny in a tiny and it takes them out of competition for the large housing market and and that that might be helpful too so I'm all about they're great they're a great additional arrow in the quiver like basically anytime I'm

3:13I'm a yes in my backyard guy right so anytime there's an idea I can say yes to I'm like yes yes let's try that yeah and and if it and if there and let's watch and five years from now we go there's some unintended consequences let's pass let's make some rules about those consequences but we got to stop saying no to ideas because that hasn't worked that's got us where we are yeah yeah that's a great point and you mentioned the utility hookups which I think is really important because I think a lot of people see a price tag on a tiny home on the side of the the street that's like oh wow it's only $4,000 to have a home you know it's so cheap and then they don't think about all that goes into that all the the structure underneath of it the utilities to it maybe you build a deck around it like all a sudden it like to your point it turns into a

4:01Six-figure project is there a way that you could do this off grid have you seen that done where people are building adus that they don't require all the underground to them so this comes down to that local planner or your level of comfort with risk but so so you can the offgrid technology has advanced remarkably since I even since I've been in the space and like what what the super battery factories and stuff like that have done to battery costs is really great so what what the biggest challenge with going off grid before in a permitted situation was you needed to have a really really expensive battery setup to be a legal off- grid

4:50Now those battery setups are are relatively affordable I think I want to say low five figure high four figure so so you can you can have completely offgrade solution with your own solar or whatever energy production solution you want and and you can you can achieve that and it's actually like I I was just at the HUD Housing and Urban Development in DC did a Innovation show Innovative housing showcase on the National Mall and I didn't put the video of the solar battery guy in the sizzle reel maybe I'll maybe I'll upload that separately and give you a link when I do but the but but there are really really incredible solutions that are on market and available now very interesting totally worth investigating if that's if that's what you want but again

5:39The first question is like you call the planner and you're like hey if I wanted to put a little structure on this property off grid is that an option for me and and like get get them into the conversation unless you have a very high threshold for risk and and like if you're not using it for Strangers Like A short-term rental and you're using it for yourself you know I'm not going to tell you what to do yeah yeah yeah yeah some off-grid people are the thought of even talking to a government official makes them cringe exactly well and they're probably not looking at me for advice you know you're doing that you you you you got this buddy like yeah exactly yeah exactly no I appreciate that answer that's that's interesting to know that there's a lot more solutions these days for for that technology which is great yeah

6:28And it's getting cheaper every day which is which is fantastic news so totally oh and sorry so that's electrical and then like there are toilets that you know you can you can get the incinerating toilets you could be on septic Which is less independent offgrid but you know it's doable and then there's also like I I just saw one again at that housing showcase where they got like a NASA toilet in there and it like it has some an organic compound that digests your your black water and turns and separates it into like gray water and reusable and like it's a whole thing so more solutions becoming available all the time for the things that would keep you on grid in the past Century yeah yeah interesting wow one thing I was curious about

7:16Too is you know my wife and I talk about like one of the biggest regrets we have around you know converting This Barn because we've been operating it for about two years now and it's just been fantastic and we're like you know we wish we had used some of the other space because this is a huge 55 by 65 foot pole bar it's massive but we wish we would have just made two units out here instead you know because there's so much demand for it people love coming to the farm and stuff have you seen people build multi-unit Adu structures yeah this you're you're hitting all my my my favorite things from this Innovation showcase actually so a yes you can put multiple units in in a single structure and it goes back to that townhouse argument I was making yeah it's it's way better in a lot of ways there's a lot of energy savings from

8:05Shared wall you could still create a lot of sound privacy these days it's it's not it's it's not a bad solution and especially for short term like people people will be very happy for the cost savings there are a couple of those states that I just listed it used to be like we would eek for it a lot and be like you could build 1 Adu you could build 1 Adu and a junior ad you could build you could build both like slowly we build up to like you can you can actually build three now states are coming out the gate and being like you can build 2 ad is and okay and if they if they do that you can look and see do I do I have the ability on my lot to put them both in one structure in California there's a lot of different ways to get to to that that form whether it's an Adu

8:53Or an SP sp9 or blah blah blah there's a lot there's a lot of tools and then speciic specifically the first HUD code duplex so this is a manufactured house coming off the line at Fleetwood like one of the big manufactured home manufacturers and they they are creating a single section duplex and what that means is you're getting two units on one truck and they share a wall they have two kitchens two bathrooms and two entrances and this is going to Revolution in my opinion it's going to revolutionize the cost of developing 2unit properties you're going to be able to plop these down skip a lot of the inspection phases not all of them but a lot a lot of the inspections happen at factory with manufactured housing

9:42And you're basically looking at on-site inspections and utility connections and you're just going to speed up the timeline on producing duplexes in a really incredible way and and it'll have a dramatic impact on cost so that's really exciting and yes absolutely if if you've got either either what you talked about a big building that you're trying to convert or Greenfield development both always think about shared wall multi-unit yeah wow that's awesome I I never you know really considered that to be the case until we did this one and then I was like wow you know probably could have just added a second unit there and would have made a ton of ton of sense and I think I mean for for my audience who are you know really mostly investors just from a number standpoint

10:31Like if you think about it a lot of like our I think our best deal might be the one we just finished up and it's a single family home that had a Adu in the back but it was all gutted and it just it already had the utilities to it but we bought it for the same price as another single family home like they just they didn't really count that as Extra Value when they were selling it so you know we fixed up both Pro they both needed a big rehab so we fixed up both of them but it wasn't that much more to fix up this small Adu in the back so our expense side of the equation is basically the same as if we had bought a single family but yet we're bringing in an extra $2,500 a month from the short-term rental which if you think about it that goes straight to the bottom

11:19Line it's like pure profit there's no extra I mean there's a few little bit extra utility expense and that sort of thing but I mean it just from an investment St point this multiple unit strategy just I I you know it blows everything else out of the water from from everything I've seen so and and today it's a lot of Buy and Hold because it's great math but then these are going to acrew in like people are going to learn how to price adus differently California now allows some places to condo eyes and sell the Adu separately that will establish separate values for the use that's already happening in Texas and Seattle too and so all of these changes will also mean that as you sit on the property and use it it's actually

12:09Not Financial advice but I I think of it as a as a a value that's crewing sorry an asset that's acre value because the perceived value in Market is going is changing over time yeah whereas yeah it's it's just a really exciting opportunity yeah well especially with Millennials coming in you know right out of college a lot of them have debt like they can't afford a a a like big property you know like or a single family home that they're going to have to pay for themselves so buying a property where the back unit pays for the whole property it just it makes so much sense so from a value standpoint I think the more of those that become like the more that becomes a common practice the more value people are going to place on that because they're going to realize this is just a way to free myself

12:57Of this huge debt Bur totally and like this is an extreme example but you know as we just don't have enough options right and so in a really tight housing market like the South Bay or East Bay where I where I'm at they there are guys building 300 foot micro units and renting them out for like 3,000 a month but on on three Monon or less leases right so they're focused they know their customer it's a traveling professional it's a student for a short term and it's it's a lot of money for what it is for that for that renter but it's 300 cheaper than the next cheapest thing and so for the renter they're like that's that's my option like I would much rather be alone in a studio unit than sharing

13:46And competing with a huge market for a house where I have to find four roommates and we're like fluctuating all the time and so that's a market that exists because you're you're the cheapest thing on the market the most affordable thing on the market so you actually get a premium for your investment and and like you just have to J he has to juggle vacancy differently than everybody else does but there are ways to think about that stuff right and so the the more you explore the fringes yeah there's risk but there's also some interesting opportunities where you're like speaking to a market that just doesn't exist and so that's Al also interesting yeah oh