Podcast Summary
The David Greene Show with Shane Sanders | EP 81
Date: August 21, 2025
Host: David Greene
Guest: Shane Sanders
Topic: Innovative Legal Strategies to Maximize Value and Cash Flow via ADUs and Condoization in Central Washington
Overview
In this engaging episode of Real Talk Real Estate, David Greene sits down with Shane Sanders, an inventive real estate investor from Central Washington. The conversation centers on Shane’s unique approach to maximizing both cash flow and the long-term value of single-family properties by building Accessory Dwelling Units (ADUs) and leveraging Washington state condo laws to “condoize” properties—creating independent parcels without traditional subdivision. Listeners learn about the legal loopholes, construction logistics, and financial structures that allow investors to sidestep restrictive city code, optimize ROI, and operate sustainably in today’s real estate environment.
Key Discussion Points and Insights
1. Shane’s ADU + Condoization Strategy
- Description:
Shane purchases single-family homes on large alley or corner lots and adds two ADUs. Because most cities restrict subdivisions, he utilizes Washington’s condo laws to legally split the parcels, giving each unit its own Assessor’s Parcel Number (APN).- “[I] build two ADUs on the lot…then I condo the property because I’m not allowed to subdivide it…I can either sell or finance them separately.” (01:47, Shane)
- Benefit:
This approach allows each residence to be sold, financed, or rented independently, significantly increasing their market value. - Nuance:
There’s typically a slight decrease in the main home’s value after condoization, but the newly independent ADUs’ values “skyrocket.” (05:39, Shane)
2. The City vs. State Regulatory Loophole
- Legal Side-Stepping:
Washington, Oregon, and California have state laws that override city ordinances, forcing cities to allow certain kinds of ADU development and condoization.- “You’ve basically figured out a way to play the legal game so they can’t stop you from doing this.” (09:39, David)
- HOA Structure:
Properties must form an HOA (as low as $35/year) for legal compliance, but these are minimal compared to traditional condominium associations. (06:56, Shane) - Recent Law Changes:
As of two years ago, cities in Washington cannot restrict condoization of ADUs; some cities delayed enforcement but must comply by end of 2026. (07:47, Shane; 13:11, Shane)
3. Challenges with City Bureaucracy
- Permitting Obstacles:
City officials can create obstacles, but Shane’s strategy ultimately bypasses them by going through county and state gov’t instead.- “If you can get somebody involved that says you can’t fight this guy…this may work better.” (14:19, David)
- Resistance Example:
“They just go around forever never getting it fixed. You’ve sort of just walked in and said, hey, big brother here says I can do it, so back off.” (12:11, David)
4. Construction and Management Process
- Shane’s Background & Process:
Shane manages the build process himself, using architects for plans (about $5,000/plan) and subcontractors for various elements to keep costs around $120,000-$175,000 per ADU. (15:46-20:14, Shane)- “If I hire a GC, it’s going to cost well over $210K…but if I do it myself, I can save almost $100K per ADU and that makes a profit.” (16:43, Shane)
- Location Selection:
Prefers alley or corner lots for privacy, access, and separate feel for each unit—aesthetically indistinguishable from traditional homes. - Simplified Designs:
Units are intentionally basic rectangles for ease, cost reduction, and approval: “I keep them super simple…a rectangle…I don’t get fancy with them.” (46:26, Shane)
5. Financing and Scaling the Model
- Funding:
Shane uses a combination of cash, credit, and construction loans (usually 11% interest-only, 12-month term, ~ $12,000 in closing costs), followed by a cash-out refinance with DSCR loans to recycle capital and maximize leverage.- “Assuming I build the first one with cash…then do a cash-out refi, but it’s still collateral of the existing loan on the existing property, the whole parcel…so the financing cost stacks up.” (21:47, Shane)
- Brrrr Method (Buy, Rehab, Rent, Refinance, Repeat):
Shane’s strategy is essentially the BRRRR method, but the value-add and equity are manufactured by “condoizing” ADUs, not just standard rehabs.
6. Market and Investment Rationale
- Choosing the Right Market:
Shane emphasizes investing in smaller, affordable markets, such as Ellensburg and Wenatchee, where a significant portion of lots allow for ADU development and demand remains resilient due to affordability.- “About half the lots in this area, they’re on alleys…it’s almost too easy to find them.” (33:24, Shane)
- Future Recession-Proofing:
Greene and Sanders both discuss how affordable housing in smaller markets is likely to outperform high-cost “sexy” metro areas in economic downturns.
Notable Quotes and Memorable Moments
-
Greene (on city bureaucracy):
“Isn’t it a blast getting the privilege of dealing with city government officials that are just committed to making the most of our tax dollars…helping you achieve your goals of providing more housing?” (03:01) -
Sanders (on legal navigation):
“Technically it’s still just a regular lot, but through the county now it has its own parcel number, which means it could be sold or financed independently…” (07:03) -
Greene (on the BRRRR model):
”Your model is superior. This would work. Whereas…these are multi-million dollar properties that have just drained me of reserves because I couldn’t sell it…and they wouldn’t let me fix the problem.” (11:02) -
Sanders (on cost management):
“I try to make them look nice, but also keep them cheap.” (36:15) -
Greene (on the new breed of investors):
“You’ve got people wearing a T-shirt and a hat, driving a pickup truck, not a BMW, going to the site—not with cameras and lighting, but with a tool belt and work boots.” (42:07) -
Sanders (advice to others):
“Anyone can do it…I think anyone with or without construction [background] could do this…there’s so much profit in this strategy.” (42:18)
Key Segment Timestamps
| Timestamp | Segment | |-----------|-----------------------------------------------------------------------------------| | 01:47 | Shane introduces the ADU + condoization strategy | | 06:56 | HOA implications and legal nuances of condoizing ADUs | | 09:39 | Leveraging state law to bypass restrictive city codes | | 12:11 | David shares horror stories of city obstruction in other states | | 15:46 | Shane explains how he does construction management himself | | 21:15 | Discussion of the “hold vs. sell” decision and the financing model | | 23:34 | Construction loan structure and interest rates | | 27:16 | Shane’s portfolio: 9 properties, details on scaling with BRRRR and new laws | | 33:13 | Scaling through volume and frequent deal flow in alley-lot markets | | 38:47 | How population trends and affordability drive rent demand in smaller markets | | 42:18 | Who should use this strategy and the role of investor skill/confidence | | 45:01 | The tax and leverage advantage of the cash-out refinance over selling | | 46:26 | Avoiding complexity: keeping ADU projects simple and cost-effective |
Who Should Consider This Strategy?
- Investors frustrated by high-interest rates and tight cash flows in traditional rentals
- DIY-oriented individuals or those with construction backgrounds looking to maximize returns
- Those in Washington, Oregon, or California where state law favors ADU development and condoization
- Investors operating in affordable, lower-density markets with lots suited for ADU additions
Conclusion
Shane Sanders’ approach—leveraging state-level legal structure for ADU development and condoization—emerges as a forward-thinking playbook for investors in restrictive markets. Unlike conventional “turnkey” models, this strategy rewards sweat equity, legal savvy, and local know-how, positioning investors to thrive in the shifting real estate landscape.
Connect with Shane:
- Instagram: @SugarShaneSanders