The ADU Playbook: Build Wealth With Accessory Dwelling Units | Kevin Trinh

Summary

Podcast Summary: The Science of Flipping

Episode: The ADU Playbook: Build Wealth With Accessory Dwelling Units | Kevin Trinh

Host: Justin Colby | Guest: Kevin Trinh

Date: October 17, 2025

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Overview

This episode of The Science of Flipping dives deep into the world of Accessory Dwelling Units (ADUs) as a powerful strategy for real estate investors to build wealth, generate significant cash flow, and maximize property value. Host Justin Colby interviews Kevin Trinh—a seasoned contractor, investor, and leading ADU mastermind—about every aspect of the ADU business model. The conversation covers ADU fundamentals, profit strategies, regional trends, construction challenges, financing, rental models, and unique exit options, all geared toward listeners eager to capitalize on this growing trend.

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Key Discussion Points & Insights

1. What Are ADUs and Why the Hype?

Timestamp: 01:14 – 04:24

• Definition & Basics:

  • ADUs (Accessory Dwelling Units) allow property owners to add a secondary small unit (typically 800–1,000 sq. ft.) in the backyard of an existing single-family home.
  • Purpose: “ADU is one of the new trends… the revolution right now in the real estate investing market.” — Kevin Trinh (01:14)
  • These units can spike equity, increase rental income, and provide affordable housing in dense areas.

• Zoning & Lot Requirements:

  • Minimum lot size is about 5,000–6,000 sq. ft.
  • No parking required, minimal setbacks, and flexibility on unit size, especially in places like San Diego.
  • “The simplicity of an ADU…no parking requirements, very minimal restriction. Setbacks are usually still that 4–5 ft range.” — Kevin Trinh (03:11)

2. Location Strategy & Neighborhood Targeting

Timestamp: 03:46 – 04:25

• Best neighborhoods: Focus on “B to C” areas for optimal cash flow and equity (“Never A, either”—high-end neighborhoods resist change, while “D” neighborhoods underperform for appreciation).
• Importance of being “hyper local” and understanding specific market conditions.

3. Regional Adoption & Legislative Landscape

Timestamp: 04:25 – 07:51

• ADUs are already prevalent and still expanding in West Coast states, with growing adoption in East Coast hubs and trickling into central US markets.
• Key states: California, Washington, Oregon, Texas, Florida, New Jersey, New York, Massachusetts.
• Legal frameworks and consistency still vary city to city; only about 10–12 states have comprehensive state laws supporting ADUs.

4. ADU Construction Process & Timelines

Timestamp: 05:21 – 06:34

• Contractor's perspective:
  • Permits possible in 6 months, typical construction in another 4–6 months—entire process can be done in about a year.
  • Multiple ADUs can be built on a single property, especially when leveraging both two-story structures and garage (as JADU: Junior Accessory Dwelling Unit) conversions.

5. Business Models: ADU for Cash Flow, Value, and Scale

Timestamp: 08:03 – 09:57

• Traditional “BRRRR on steroids”: Buy a property, add ADUs to boost equity and rental income, then cash-out refi, hold, or sell.
• “Equity doesn't pay the mortgage. Cash flow pays the mortgage, bro.” — Kevin Trinh (09:33)
• Entitlement play: Acquire and entitle properties for ADU use, keep best ones, sell/flip the others as turnkey opportunities to investors.
• Short-term vs. long-term: ADU models can be stretched across short, mid, and long-term rental strategies for further diversification.

6. ADU Unit Configurations & Features

Timestamp: 12:33 – 14:24

• Potential for 3+ units on a standard lot:
  • E.g., Main house, two-story detached/attached ADU (upper/lower units), and garage conversion.
• Unit specs: Studios, 1-bed, or 2-bed units possible; require full baths but not parking spaces.
• “The studio is a garage conversion… still has a one bath, one full bath and one bedroom and a small kitchenette. So, like, almost like a studio.” — Kevin Trinh (14:24)

7. Financing Challenges & Lending Trends

Timestamp: 15:31 – 17:37

• Construction loans are available for projects under four units; larger “bonus program” projects may be considered commercial, making loans harder to secure.
• Lack of comps in emerging ADU markets can complicate appraisals and lending.
• Anticipation: “Government… is going to get into backing up these ADU loans… we can potentially go out and lend to ADU investors in the future as well. That’s a big play, bro.” — Kevin Trinh (17:52)

8. Cost and Profitability Snapshot

Timestamp: 18:32 – 19:09

• Build costs: Typically $150–180k for a 600-sq. ft. unit, $300–400k for double units.
• Resale values: In SoCal, an ADU comps for ~$400–500k; Seattle, ~$700k per unit.
• Flip potential: “You’re making 400,000 spread on these.” — Kevin Trinh (18:53)

9. Long-Term vs. Short-Term Hold Strategies

Timestamp: 19:34 – 20:53

• In emerging markets (less ADU precedent/comps): Be prepared for a “buy and hold” play of 10 years+ for maximal gain.
• “When it comes, you’re ready for this play.” — Kevin Trinh (19:51)

10. Construction & Infrastructure Details

Timestamp: 22:13 – 23:09, 24:54 – 25:28

• All utilities (water, electric, sewer) usually tie in at street, not from main house.
• Watch out for challenging lots (avoid hillsides); flat lots are far easier for ADU build-outs.

11. Exit Strategies: Condo Mapping & New Opportunities

Timestamp: 27:49 – 29:37

• Unique opportunity: Some regions (California, Seattle) now allow “condo-mapping” ADUs—sell them off individually, like condos.
  • “Eventually you’re able to get parcels on these, condo mapping, sell it individually.” — Kevin Trinh (28:29)
• Multiple exits: can cash flow, hold, or sell-off units separately.
• Distinct from “pad splits” (multiple bedrooms in one home)—ADUs are more sustainable, salable, and attractive to institutions.

12. Lessons Learned: Growth, Failure, & Foundations

Timestamp: 33:31 – 36:18

• Both host and guest reflect on scaling pains—too much, too fast without a solid business foundation.
• “Passive income is not passively built. It is passive when it's built.” — Kevin Trinh (35:20)
• “Just remember: build deep, build up.” — Host Justin Colby (36:15)

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Notable Quotes & Memorable Moments

• “ADU is one of the new trends… the revolution right now in the real estate investing market.” — Kevin Trinh (01:14)
• “The simplicity of an ADU…no parking requirements, very minimal restriction.” — Kevin Trinh (03:11)
• “Always buying the B to C neighborhoods. Never A either.” — Kevin Trinh (03:48-03:51)
• “Equity doesn’t pay the mortgage. Cash flow pays the mortgage, bro.” — Kevin Trinh (09:33)
• “The ADU space has grown 15,000% since 2016.” — Kevin Trinh (18:07)
• “Passive income is not passively built. It is passive when it’s built.” — Kevin Trinh (35:20)
• “Just remember: build deep, build up.” — Justin Colby (36:15)
• “Eventually… you’re able to get parcels on these, condo mapping, sell it individually.” — Kevin Trinh (28:29)

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Segment Timestamps

• ADU Basics & Lot Requirements: 01:14 – 04:24
• Location & Neighborhoods: 03:46 – 04:25
• Where ADUs Are Hot: 04:25 – 07:51
• Permits, Construction Timelines: 05:21 – 06:34
• Business Models: 08:03 – 09:57
• ADU Unit Configurations: 12:33 – 14:24
• Financing and Lending: 15:31 – 17:37
• Costs & Comps: 18:32 – 19:09
• Long-Term Hold Areas: 19:34 – 20:53
• Technical Construction Notes: 22:13 – 23:09; 24:54 – 25:28
• Condo-Mapping Exit Strategy: 27:49 – 29:37
• Scaling & Wisdom: 33:31 – 36:18

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Conclusion

This episode is an essential listen for real estate investors looking to unlock a “hidden” vertical with huge upside. Kevin Trinh’s expertise shows not only the practical steps for launching an ADU strategy but also the nuanced thinking behind neighborhood choice, construction, financing, and ultimate monetization—including innovative exits, like selling off individual units as condos. The conversation is candid, practical, and energizing—packed with real numbers, tactical guidance, and honest reflection on the challenges and opportunities of scaling an ADU-focused business.

For anyone interested in learning more, Kevin Trinh’s “ADU Mastermind” is available for deeper insights and community support.

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Connect with Kevin Trinh on Instagram: @thekevintrinh
Stay tuned for future episodes of The Science of Flipping for more high-level real estate insights.

Transcript

[Kevin Trinh]

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[Host (possibly a real estate or investment podcast host)]

Learn [e-mail] what is up the science flipping podcast family. I'm super excited about this. There's a lot of different verticals in real estate and you can pick and choose your lane. And this is a lane I've been well aware of. I myself don't do it, but I do believe more people need to be doing and 80 years efficiencies. Call it what you will, my boy. The expert in ADUs, Kevin Trinh is here. What's up, dude?

[Kevin Trinh]

What's up, brother? Thanks for having me here, dude.

[Host (possibly a real estate or investment podcast host)]

This was a long fight to make sure that this worked out, but I'm glad you made it to Miami and couldn't be happier. So let's dive in.

[Kevin Trinh]

Yeah.

[Host (possibly a real estate or investment podcast host)]

First of all, I want everyone to know where to find you all over social media. So give the handles on where to find you.

[Kevin Trinh]

Yeah. On Instagram, the Kevin Trinh. Facebook, the Kevin Trinh. We also have the ADU mastermind in San Diego. So if you guys are looking forward to learning more about the ADU games, then reach out to me. Right?

[Host (possibly a real estate or investment podcast host)]

Yeah. So let's talk about adu. Some people maybe not even heard of it, right? They, they fix and flip or they buy rentals. So they may not be that familiar with ADUs. What are ADUs? What are efficiencies like? So what is this?

[Kevin Trinh]

You're right, man. There's, there's a lot of real estate play out there. You already know, brother. But ADU is one of the new trends, right? It's the revolution right now in the real estate investing market. So ADU basically allows you to put a casita or a small unit in the back of a property, right? Existing property. So you're allowed to buy a single family and then get permits and add on an ADU, which is anywhere between the size of 800 to a thousand square feet in the backyard. This allows you to really spike the equity and create massive cash flow. Right.

[Host (possibly a real estate or investment podcast host)]

So out of the gate, couple questions. Do you need to have a certain size lot? So I'm sure there's certain rules. So I want to get into kind of the rules of the game because I think some people watching this like, oh, I just want to do an adu. And then they're not aware how big is a lot. Have to be like, what's the minimum lot size?

[Kevin Trinh]

So the minimum lot size at least needs to be about 5 to 6,000 square feet. Okay. And the reason being is that there is a floor area ratio that you need to understand. Right. Most of the time is 0.5. In San Diego, you can get up to 0.65. So a little bit more, you can use up more space that allows you to build more units essentially.

[Host (possibly a real estate or investment podcast host)]

So you could put an 80 you on. So when you say 6,000 square foot lot. Yeah. That means there's already a house and you build an ADU, is that what you're saying? On a 6,000 square foot.

[Kevin Trinh]

Yeah. Most of these houses are only a thousand square foot that we are looking at. Right. So, you know, understanding the buy box criteria really will really give you the ability to build and, you know, add these ADUs in a bag, you know.

[Host (possibly a real estate or investment podcast host)]

So being from California, like San Diego, Southern California, this is very, very common. Northern California, maybe not as much. Yeah, but you're right. When I think about like L. A. So I went to ucla, I think about all the homes that are the. The main home before someone like yourself would maybe put in an ADU made homes only like a thousand square feet.

[Kevin Trinh]

Yeah, brother.

[Host (possibly a real estate or investment podcast host)]

Typically.

[Kevin Trinh]

Right.

[Host (possibly a real estate or investment podcast host)]

And so you still have this 5,000 square feet or more. Yeah. That you can do. Now does. Does the ADU need to have any level of a driveway or does that.

[Kevin Trinh]

So the simplicity of an adu, this is why it's so popular. No parking requirements, very minimal restriction. Setbacks are usually still that 4 or 5ft range you need to have between the properties. And then the one thing that you truly need to understand is that you got to find properties that is in the right location. Because a lot of people what happened, and I see this all the time, people say, oh, I can build an edu, spike equity, create great cash flow, and they go and buy in the D neighborhood, bro. That's not the way to play it. So you still need to understand the strategy behind it and get, you know, in the right location to.

[Host (possibly a real estate or investment podcast host)]

What's your strategy?

[Kevin Trinh]

Always buying the B to C neighborhoods. Okay. Right.

[Host (possibly a real estate or investment podcast host)]

Never A either.

[Kevin Trinh]

Never A either.

[Host (possibly a real estate or investment podcast host)]

Okay.

[Kevin Trinh]

All right. A gives you a lot of problem when you're adding these ADUs.

[Host (possibly a real estate or investment podcast host)]

Because City, the. The permits and all that.

[Kevin Trinh]

No, it's actually. It's more on the neighborhoods, bro.

[Host (possibly a real estate or investment podcast host)]

Oh, yeah, yeah. The neighbor doesn't want to hear it. Yeah, yeah, yeah.

[Kevin Trinh]

And so more neighborhoods, more. Less headache. If you get into, you know, the B's and the C's, the D's won't spike the equity that much and then you won't get great cash flow from the rentals. Yeah. Right. But you know, this, this is something that I think that a lot of real estate investors don't truly understand is that, like you mentioned real estate, there's so many different verticals, different plays out there. Right. You just got to understand. You got to be hyper local.

[Host (possibly a real estate or investment podcast host)]

Yeah.

[Kevin Trinh]

You understand your market, right?

[Host (possibly a real estate or investment podcast host)]

Yeah.

[Kevin Trinh]

So ADU is really good on the west coast, is growing popular in the east Coast. It's not too popular in the central of United States yet. So, you know, most of the time it's multifamily.

[Host (possibly a real estate or investment podcast host)]

And Dallas, you know, it's funny. It's, it's. I do a lot in the central. Well, south, East.

[Kevin Trinh]

Yeah.

[Host (possibly a real estate or investment podcast host)]

Right. So North Carolina all the way through, like Florida, Alabama. I feel like those areas are prime for this type of business model.

[Kevin Trinh]

It's getting there.

[Host (possibly a real estate or investment podcast host)]

Is there, is there a reason you wouldn't want to do it? Like, is there a. I think because.

[Kevin Trinh]

The, the, the, you know, when ADU was created, they were created in a sense to relieve some of that affordability issue.

[Host (possibly a real estate or investment podcast host)]

Sure.

[Kevin Trinh]

And affordability issue, most of the time are in the dense area. So SoCal, Seattle.

[Host (possibly a real estate or investment podcast host)]

Yeah.

[Kevin Trinh]

You know, New York is another problem right now. So it's growing, you know.

[Host (possibly a real estate or investment podcast host)]

Is that why you're going to New York?

[Kevin Trinh]

Yeah.

[Host (possibly a real estate or investment podcast host)]

Business opportunity.

[Kevin Trinh]

Business opportunity. So, you know, we're, we're always looking at markets to see where we can grow and scale.

[Host (possibly a real estate or investment podcast host)]

Always.

[Kevin Trinh]

I started off doing ADUs in 2016. Right. Background is that I'm a contractor, so I have a GC trade. Right. 20 years in the industry. Been building ADU since, you know, forever. So ADU has been around since 1983 in California for a lot of people who don't know this, but because of the affordability issue, they took that play and then gave it to the public, you know, and streamlined the whole process where you can get permit in six months, get the sting built.

[Host (possibly a real estate or investment podcast host)]

So is that fast, in your opinion?

[Kevin Trinh]

Oh, yeah.

[Host (possibly a real estate or investment podcast host)]

To get the permit or to get it built?

[Kevin Trinh]

To get a permit. And even built, it's another, you know, four to six months to build after that.

[Host (possibly a real estate or investment podcast host)]

So within a year or so, you should be able to have not just the permit, but the actual structure.

[Kevin Trinh]

The actual structure up and you can add easily 2 to 3 units on a basic ADU play.

[Host (possibly a real estate or investment podcast host)]

Okay, so when you say units, two or three different ADUs.

[Kevin Trinh]

So one building. Right. Which is about a thousand square feet. Yes. Ocal. I'm giving you example in SoCal. Yeah. Yeah. You're able to add a two story 1,000 square feet in the backyard. Right. That gives you the ability to split it up to be one unit on.

[Host (possibly a real estate or investment podcast host)]

Top, one unit on the bottom, two separate entrances.

[Kevin Trinh]

Two separate entrances. And then now you can also take the garage and turn that into a J80. You play. So now you can essentially add three units on a single family property.

[Host (possibly a real estate or investment podcast host)]

Gosh darn it now. So this is why I love my podcast, right. And now you're making me think about my rentals, and I'm like, can I add an adu? Can I make more money? Can I, you know, you know, even the ones, man, this is such a cool thing. Are you aware of. And you may not be like, are you aware of any, like, states that restrict this play or that it's not legal?

[Kevin Trinh]

I would say that I'm not aware of any states that are not restricting the play. I would like to say that they are not. They don't have a statewide rule guideline to build ADUs.

[Host (possibly a real estate or investment podcast host)]

Okay.

[Kevin Trinh]

So certain local city and, you know, are having problem with being consistent on ability to what you can actually build.

[Host (possibly a real estate or investment podcast host)]

So talk to the city. Talk. Talk to, you know, the county, see what their laws and rules of the game.

[Kevin Trinh]

And right now there's about, you know, 10 to 12 states that allow it. State statewide.

[Host (possibly a real estate or investment podcast host)]

Yeah.

[Kevin Trinh]

Yeah. But primarily the play is really in the dense area.

[Host (possibly a real estate or investment podcast host)]

Can you list off a couple of those states just so people. Obviously California for short.

[Kevin Trinh]

The whole west coast.

[Host (possibly a real estate or investment podcast host)]

The whole literal west coast. Washington, Washington, Oregon, California.

[Kevin Trinh]

Texas is getting on board with it.

[Host (possibly a real estate or investment podcast host)]

That's cool.

[Kevin Trinh]

Yep. Florida for sure.

[Host (possibly a real estate or investment podcast host)]

Yeah.

[Kevin Trinh]

New Jersey, New York, Massachusetts, you know, so some of these states are east coast, west coast. And it's starting to trickle into the inner cities, interstates, but it's taking some time.

[Host (possibly a real estate or investment podcast host)]

You know, there's jokingly I said you're going to New York for business, but are you part of it?

[Kevin Trinh]

Nice. Yeah.

[Host (possibly a real estate or investment podcast host)]

That's very cool. So you're expanding over into the east coast.

[Kevin Trinh]

Yeah. We truly want to see how we can grow this play into newer markets.

[Host (possibly a real estate or investment podcast host)]

Right.

[Kevin Trinh]

Because that's one of my other business models in real estate is just not. It's not just building these AU to buy and hold and create a legacy, but we're trying to look how we can scale. And what we've been doing and working with the boardroom. Right.

[Host (possibly a real estate or investment podcast host)]

Yeah.

[Kevin Trinh]

Is we're trying to figure out a different place. So we would buy these property, get them all in title and cherry pick the ones we want to keep and build and hold and then sell the rest and title flip them.

[Host (possibly a real estate or investment podcast host)]

I love that. Play. Because that is just like. Well, the entitlement plan, like apartments is huge.

[Kevin Trinh]

It's huge right now. Yeah, huge.

[Host (possibly a real estate or investment podcast host)]

Or even bigger big developments. Or like Dr. Horton won't buy that piece of land. But if you go buy the piece of land, get it entitled, you can sell it to Dr. Horton and map.

[Kevin Trinh]

Test, but you take away their pain point, which is getting a timeline done. Years and years of holding costs and all that stuff. Right.

[Host (possibly a real estate or investment podcast host)]

That could be a huge play for you.

[Kevin Trinh]

But in the ADU space it's a lot shorter timeframe and so your holding cost is not that much.

[Host (possibly a real estate or investment podcast host)]

Yeah.

[Kevin Trinh]

And then you can flip these back out for investors who are truly, you know, want to start an ADU but don't know the process.

[Host (possibly a real estate or investment podcast host)]

What, so who, who, what is your business model? Like, why would someone Want to do ADUs? What is the right business model? Maybe what is the wrong one? Or what it. Like you just said, like there's even an entitled play which I didn't even think of. But like, what's the traditional business model for an adu?

[Kevin Trinh]

Just. The traditional model is just people buy single property, they value added. Like a burr model, right? Yeah. So I, I like to call it the Burr model on steroids. Pretty much that's what it is.

[Host (possibly a real estate or investment podcast host)]

Yeah.

[Kevin Trinh]

You buy a single property, you, you rehab it, you value, add it, spike the equity and then either you sell it or, or you hold it and then rent it out. But in this case, because of the multi unit that you're adding on, you're able to cash flow greatly on these. And you know, dude, equity doesn't pay the mortgage. Cash flow pays the mortgage, bro. That's right. So understanding that right there will give people the understanding of using the ADU so that they can build a great cash flow.

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[Host (possibly a real estate or investment podcast host)]

Do more people go into this short term rental type play where this is they have the ADU more almost like a short term rental.

[Kevin Trinh]

Correct. So I have some old clients, past clients of mine where we build ADUs for them and they use the front house, the main house as the short term rental the other three units of just cash flow.

[Host (possibly a real estate or investment podcast host)]

So you said three units. Yeah. How do you get three units out.

[Kevin Trinh]

Of so again to most people would buy the single family on a 6,000 square foot lots of and they would build a attach or detach ADU in the back, thousand square foot two stories so four units five to six hundred each each square foot on each floor and then you convert the garage into a JDU play so that gives you two plus one in the front.

[Host (possibly a real estate or investment podcast host)]

What is it J80U?

[Kevin Trinh]

Yeah. Junior at dwelling unit.

[Host (possibly a real estate or investment podcast host)]

Okay, so you just convert the garage. You put a big. So when people think about safety or whatever, you just put a big bolt on the door or do you wall it?

[Kevin Trinh]

No, we wall it in. Yeah. So take the garage door out, put in the wall, give it a separate entrance.

[Host (possibly a real estate or investment podcast host)]

And there's no entrance into the main it that gets walled in.

[Kevin Trinh]

That's correct. Everything is walled in.

[Host (possibly a real estate or investment podcast host)]

So, man, you are literally. I love doing this podcast because I always go, God, that's so brilliant.

[Kevin Trinh]

It is, man.

[Host (possibly a real estate or investment podcast host)]

You know, Brilliant. Now, you're coming from the contractor side of it to start.

[Kevin Trinh]

Correct.

[Host (possibly a real estate or investment podcast host)]

Now, you're an investor, but you're also a contractor that knows how to get through the city and get permits. Now, that is a unique perspective itself. So you mentioned it prior, you have a mastermind. What do you call the mastermind?

[Kevin Trinh]

ADU mastermind.

[Host (possibly a real estate or investment podcast host)]

Okay.

[Kevin Trinh]

Yeah.

[Host (possibly a real estate or investment podcast host)]

So if you guys are interested in this, first of all, go check out the mastermind. Is there a website or anything?

[Kevin Trinh]

We're still working on it. We're revamping it, but it should be out in a few weeks.

[Host (possibly a real estate or investment podcast host)]

Just hit them up on Instagram, let them know that you're interested. I mean, I'm freaking interested. So, come from the contractor perspective, what's needed here? Do we need to make sure.

[Kevin Trinh]

There.

[Host (possibly a real estate or investment podcast host)]

Has to be a full bath? Right. Don't need parking.

[Kevin Trinh]

No, no, don't need parking.

[Host (possibly a real estate or investment podcast host)]

But you do need a full bath. What else do you need? Segmented bedrooms. Can they be studio size? Oh, yeah.

[Kevin Trinh]

Oh, yeah. I mean, some of these we have, they're actually two ones or two twos, which is two beds and two baths. Full baths. The studio is a garage conversion that would you turn into a JDU still has a one one which is a one bath, one full bath and one bedroom and a small kitchenette. So, like, almost like a studio.

[Host (possibly a real estate or investment podcast host)]

Oh, my gosh. So would you encourage an investor like me, I have a rental portfolio to go look at that portfolio and think about whether an ADU play would work? Would you. Would.

[Kevin Trinh]

So this is.

[Host (possibly a real estate or investment podcast host)]

Or do you want to go out and look at a blank canvas and say, okay, I'm going to buy this home. It's a blank canvas.

[Kevin Trinh]

So the way I look at it is this. If you have a portfolio already. Right. And as a real estate investor, we're always looking to change up the portfolio to see how. How we can better it.

[Host (possibly a real estate or investment podcast host)]

Right, sure.

[Kevin Trinh]

How we can better the.

[Host (possibly a real estate or investment podcast host)]

Make more money.

[Kevin Trinh]

Make more money. Correct. And so you will look at the portfolio and see. Okay. Some property stats aren't due too well. You would dispel those out. Go buy into a property where you can add these ADU place and then spike the equity. And then over 20 years, you know that's just going to go up crazy. Tremendously crazy. Yeah. Right. Now I'll give you an example.

[Host (possibly a real estate or investment podcast host)]

And your pay down on the loan is going to be so fast.

[Kevin Trinh]

Correct.

[Host (possibly a real estate or investment podcast host)]

Now, can you get a construction loan for the ad?

[Kevin Trinh]

Yes and. Well, yes and no.

[Host (possibly a real estate or investment podcast host)]

Okay.

[Kevin Trinh]

So here's the tough part that I went through the face of failing a couple of times in the state of California. I can't speak about other states, but in California, when we're adding these ADU plays, right. In the beginning we only had the basic one adu, one JADU play. And then getting construction loan is easy because it's below four unit count. Okay. It's not commercial yet.

[Host (possibly a real estate or investment podcast host)]

Yeah.

[Kevin Trinh]

In San Diego we have something called the bonus program that allows you to put up to a maximum of unlimited unit count as long as it meets the far requirements.

[Host (possibly a real estate or investment podcast host)]

Yeah.

[Kevin Trinh]

So people were adding on 10, 15, 20 units in the backyard. Yeah, brother. I mean it's getting reformed now so we can.

[Host (possibly a real estate or investment podcast host)]

Yeah, that's gonna be. That's too much. That's like an apartment.

[Kevin Trinh]

It is apartment.

[Host (possibly a real estate or investment podcast host)]

Yeah.

[Kevin Trinh]

So you can put it on up to six. And the problem is that with that is that when you go get a construction loan, the lenders are playing this as a commercial play now. And that makes getting a construction loan for it a lot harder because they can't comp the ARV on these ADU units.

[Host (possibly a real estate or investment podcast host)]

Right.

[Kevin Trinh]

They don't know what it costs. So that's the tough part about the ADU play in the very beginning because there's no true track record yet. Right. It's only been around since 2016.

[Host (possibly a real estate or investment podcast host)]

And that's why when you say there's markets like. So we'll look because we do a lot of marketing in that southeast region. You go into a market like the state of Alabama and you. There's no comps for any of it.

[Kevin Trinh]

Y.

[Host (possibly a real estate or investment podcast host)]

And that's what makes it so difficult because I, I come across homeowners who, they have basically an ADU play and they're trying to sell it for a premium. And when you go try to comp two properties on one lot, borderline impossible because it's not popular there yet. Like there's nothing else around. Yep. So it's, it's hard to hear lending play. You just correct. You have to say, okay, is this a good investment or not?

[Kevin Trinh]

Correct.

[Host (possibly a real estate or investment podcast host)]

But the way I look at it. So you can use a HELOC to build this.

[Kevin Trinh]

Sure. Yes.

[Host (possibly a real estate or investment podcast host)]

You could use a construction loan for the most part. And then you have just like double, triple or quadruple the pay down of your loans pretty much. I look at real estate kind of with the four legs. Right. So you have depreciation for the tax write off, you have income from the rents. Then you also have appreciation of the market and then you have principal buy down. Yeah, principal buy down. With the ADU play, I think is.

[Kevin Trinh]

It'S the big one.

[Host (possibly a real estate or investment podcast host)]

Big one.

[Kevin Trinh]

And the big thing that now that you're mentioning about lending, talking about that a little bit, the beautiful part is that the government essentially is going to get into backing up these ADU loans. So they're in the talks right now. And I've been discussing with Tim also. Tim Herriot.

[Host (possibly a real estate or investment podcast host)]

Yeah.

[Kevin Trinh]

And we're looking at things like, you know, if governments are going to back these loans, we can potentially go out and lend to ADU investors in the future as well. That's a big play, bro.

[Host (possibly a real estate or investment podcast host)]

Huge, dude.

[Kevin Trinh]

Give you a context of how Tim's.

[Host (possibly a real estate or investment podcast host)]

The right guy to be talking to.

[Kevin Trinh]

I love Tim.

[Host (possibly a real estate or investment podcast host)]

Yeah.

[Kevin Trinh]

To give you some perspective, the ADU space has grown 15,000% since 2016.

[Host (possibly a real estate or investment podcast host)]

15,000?

[Kevin Trinh]

Yeah, bro. It's crazy, man, how much growth it's hitting right now. And to give you some also other ideas of what they're comping right now for in SoCal, one of these units can comp for around 4 or 500,000 a unit. In Seattle, these guys were comping around 700,000 a unit, brother. And it only cost them to build. 300,000 to build.

[Host (possibly a real estate or investment podcast host)]

So what is it as a contractor? What is it? What's the cost per square foot? Now, I understand California versus Alabama is probably different.

[Kevin Trinh]

I like to give the price range an average of how much it costs to build overall. Because square foot is depending on location.

[Host (possibly a real estate or investment podcast host)]

That's right.

[Kevin Trinh]

So overall I would like to say that if you were to build one unit count, right. A unit is like a 600 square foot unit, right.

[Host (possibly a real estate or investment podcast host)]

Okay.

[Kevin Trinh]

Costs about 150 to 180 thousand. Now one ADU, two units in the back, it's going to cost you about 300 to 400,000. But you're getting. You're making 400,000 spread on these.

[Host (possibly a real estate or investment podcast host)]

Dude, that's wild.

[Kevin Trinh]

Yeah.

[Host (possibly a real estate or investment podcast host)]

Because it gives the appreciation.

[Kevin Trinh]

Correct.

[Host (possibly a real estate or investment podcast host)]

So that's where in markets that you might be in. That's not California, not Oregon. There's not as much historical data. So you got to be a little more patient there if you're going to do it. My opinion or thought and I'd love to hear your perspective, if you're going to go do the ADU plant in markets that are not as familiar with it, be ready to probably hold it for the ten year run. More than, more than a five year run.

[Kevin Trinh]

And what we're talking about with people who are in markets that is not ADU ready but is soon to be.

[Host (possibly a real estate or investment podcast host)]

Yeah.

[Kevin Trinh]

We would tell them to look for property that has potential and just buy and hold. Like as if you were to rehab, fix and flip and hold.

[Host (possibly a real estate or investment podcast host)]

That's right.

[Kevin Trinh]

And then just be patient like you said.

[Host (possibly a real estate or investment podcast host)]

Patient.

[Kevin Trinh]

It's going to come. When it comes you're ready for this play well.

[Host (possibly a real estate or investment podcast host)]

And the principal buy down for 10 years. Like when you do want to exit. Oh my God, like I love this. This is make sure you're reaching out to him. So there's so many other like dynamic ways to look at this. So we went over cost. You need full baths, you don't need parking. You can construct it essentially, whether it's two bad, two bed, one bed studio, you can construct it however you want. The real upside is the rents.

[Kevin Trinh]

The rents.

[Host (possibly a real estate or investment podcast host)]

What else am I not thinking about? About the ADU play?

[Kevin Trinh]

Like the simplicity of it, bro. I mean it's so simple. You're talking about, you know, ground up construction. Right. Development, most of these multifamily, what takes years to get done and stabilize. Right. This is something you can do in a year.

[Host (possibly a real estate or investment podcast host)]

Yeah.

[Kevin Trinh]

And if you have the means for it, you can do multiple of these properties. So like me, we will look at doing five to six a year build wise and title wise. We will look to do and title about, you know, 20 to 30 or even 50.

[Host (possibly a real estate or investment podcast host)]

And sell it off.

[Kevin Trinh]

And sell it off.

[Host (possibly a real estate or investment podcast host)]

And you would sell it to people like me or do you sell it to institution? Who do you sell that to sell it to?

[Kevin Trinh]

Mainly investors. Right.

[Host (possibly a real estate or investment podcast host)]

Someone like myself. Someone like you still not want to deal with.

[Kevin Trinh]

Correct.

[Host (possibly a real estate or investment podcast host)]

Yeah.

[Kevin Trinh]

They don't want to have to deal with the pain. Point of going through the entitlement process.

[Host (possibly a real estate or investment podcast host)]

And so when you're finding a property and you say okay, there's room for the adu, you essentially buy it and know out of the gate. Your intention when you buy that is to go get it entirely.

[Kevin Trinh]

That's right. For other.

[Host (possibly a real estate or investment podcast host)]

So do you remodel the front?

[Kevin Trinh]

I do.

[Host (possibly a real estate or investment podcast host)]

You do?

[Kevin Trinh]

Yeah.

[Host (possibly a real estate or investment podcast host)]

Okay.

[Kevin Trinh]

And so I always look the first. When I look at this is first is the fix and flip look Can I rehab the front value out there first?

[Host (possibly a real estate or investment podcast host)]

Right.

[Kevin Trinh]

Then I look at the backyard. Can I build the ADU back there? Can I convert the garage into a jdu?

[Host (possibly a real estate or investment podcast host)]

Yeah.

[Kevin Trinh]

How many units can I put on this thing? All right. I know I'm going to make money. I just want to know how much and how I can optimize the bill to the square footage I want.

[Host (possibly a real estate or investment podcast host)]

Right.

[Kevin Trinh]

Then from there we would go into purchasing property, get entitled time and process takes about six months. After it's entitled, then we look at our entitlement portfolio and see which one we want to keep and build and hold which one we want to just dispo it out. And so after that we would have both side of the play. Right. So it's.

[Host (possibly a real estate or investment podcast host)]

Is there an underwriting model that you look at that would be any different than like the BRRRR model or just a simple rental model? Is it just the same? You just.

[Kevin Trinh]

It's almost the same. You just have to look at a few different things. When you're underwriting a deal for construction for an adu, you have to take into consideration of because you're able to tie into the existing infrastructure but there's still upgrades. You got to do upgrades meaning to the waterline, the, the electrical line. So if you're adding four units, you get a, you know, race the, the, the panels right. Into a more voltage to have more capacity to supply power to.

[Host (possibly a real estate or investment podcast host)]

And those panels, you're talking about electrical on the actual pole, electrical pole or.

[Kevin Trinh]

If it's underground, you got to go and sweep. So you got to look into those perspective. And the other also things that I look at is that if it's a flat lot or if it's on a hillside most of the time, if it's on a hillside, I don't even bother.

[Host (possibly a real estate or investment podcast host)]

You're out.

[Kevin Trinh]

Yeah, I'm out. Because the construction that the whole, the time that I need to do. Yeah.

[Host (possibly a real estate or investment podcast host)]

And put the retaining walls whole thing. It's correct. Nightmare. Yeah.

[Kevin Trinh]

Went to Rome. I thought that my boyfriend was going.

[GoFundMe Advertiser]

To propose to me.

[Progressive Insurance Advertiser]

I did use my sapphire reserve for the flight. So the points did make up for.

[Kevin Trinh]

The whole no proposal.

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[Host (possibly a real estate or investment podcast host)]

You brought up the point of, of electrical. So how do you get all the plumbing? Is that just. You dig deep and you do, you pull the plumbing from the main house. How does all that work? So because going to a backyard essentially that shouldn't usually have much plumbing or if any plumbing.

[Kevin Trinh]

Correct.

[Host (possibly a real estate or investment podcast host)]

Has no electrical tied in. So you're, you're starting from scratch.

[Kevin Trinh]

You're starting from scratch, but you're taking from the front. So what I mean by that is that even though you, you can't tie into the exact, the house itself, the sewer line, you can go to the front where. Right where it meets the city street.

[Host (possibly a real estate or investment podcast host)]

Okay.

[Kevin Trinh]

From there you tie it back in. Yeah. Pull it from there and go all the way back.

[Host (possibly a real estate or investment podcast host)]

Okay.

[Kevin Trinh]

So you, you kind of don't have to go to the city and take less of that work out. Because yeah, if you were doing ground up construction for a multi family, bro, it's, it's heavy.

[Host (possibly a real estate or investment podcast host)]

It's heavy. Yeah, you know, I've done that. That's, it's a Lot. It's a heavy lift.

[Kevin Trinh]

Yeah.

[Host (possibly a real estate or investment podcast host)]

The rental model tends to be. We kind of talked about it and I think we went left. The rental model for the ADU is more traditional. Long term. Is it usually short term? Is it midterm? How does midterm. Yeah, so would that.

[Kevin Trinh]

I think it's also market. But midterm and midterm.

[Host (possibly a real estate or investment podcast host)]

Yeah. So. But it is market. Right. So like, you probably don't see much in Arizona. Do you see much of this in Arizona?

[Kevin Trinh]

It's not growing yet. It's getting there, but it's just.

[Host (possibly a real estate or investment podcast host)]

I'm glad it's not doing it.

[Kevin Trinh]

Yeah.

[Host (possibly a real estate or investment podcast host)]

What about Vegas?

[Kevin Trinh]

No, not yet. Yeah. The market is still too soft over there.

[Host (possibly a real estate or investment podcast host)]

Yeah. And I say that because, like, obviously I built my career in Phoenix and now I live in Miami, but traveling nurses were a big play in Phoenix for a long time.

[Kevin Trinh]

Oh, for sure.

[Host (possibly a real estate or investment podcast host)]

I would assume these ADUs. And again, when we. But for those of you that maybe still don't recognize the term adu casitas, your. Your nanny's house, like.

[Kevin Trinh]

Yeah.

[Host (possibly a real estate or investment podcast host)]

That's all we're talking about is building a smaller secondary home on the property. Right. So ADU is just the formal way of describing that.

[Kevin Trinh]

It stands for accessory dwelling unit. Basically.

[Host (possibly a real estate or investment podcast host)]

That's what mean accessory dwelling unit. I didn't know that.

[Kevin Trinh]

Yeah.

[Host (possibly a real estate or investment podcast host)]

And so that's all we're talking about. Granny unit. Right. So you would maybe target that kind of, you know, might there for 30 days, 60 days type of thing. Not long term, not short term.

[Kevin Trinh]

And that's the beautiful part about adding multip units. Right. You can actually play it out in different ways. You can do one unit for short term rental, one unit for midterm rental, two units for long term rental. So you can diversify how you want to play these units out.

[Host (possibly a real estate or investment podcast host)]

Now, how do you compare this? The big craze right now. And this is why I want to lean into ADUs. The big craze is this pad split idea. How do you compare this to that? Like, what are your thoughts? Maybe you haven't thought too much about it. Everyone's like taking a house and like building eight bedrooms in the home and tearing down the walls. Concept similar. I don't like it as much. I don't like it. Like, I just don't. So for me, I think the institutional funds will find an ADU more appealing to invest in. Yep. Than a home that is 2, 000 square foot that has eight bedrooms in it.

[Kevin Trinh]

Yep.

[Host (possibly a real estate or investment podcast host)]

That's me. I don't know that to be true. There's no historicals behind either. There's no historical.

[Kevin Trinh]

Here's the big difference that the, the long term play that maybe will help answer that for you. So what you're talking about is cramming multiple rooms into a square footage space. Right. And just trying to get rentals.

[Host (possibly a real estate or investment podcast host)]

Yeah.

[Kevin Trinh]

Cash flow. The ADU play. Eventually what's happening even right now is that they're giving you the ability to sell these units off like a condo. So not only are you value adding, spiking it in the equity side, eventually you're able to get parcels on these condo mapping, sell it individually.

[Host (possibly a real estate or investment podcast host)]

Holy moly.

[Kevin Trinh]

So you have multiple exit plays on the adu.

[Host (possibly a real estate or investment podcast host)]

That is so cool.

[Kevin Trinh]

Yeah.

[Host (possibly a real estate or investment podcast host)]

Now this is. You can't maybe speak right now that everywhere would do this, but this is happening now.

[Kevin Trinh]

California, Seattle is happening.

[Host (possibly a real estate or investment podcast host)]

Seattle, Seattle.

[Kevin Trinh]

People are already selling out there. That's why their comps are so high on one unit. 700,000.

[Host (possibly a real estate or investment podcast host)]

Yeah.

[Kevin Trinh]

Because they're selling these right now. Right. Condo, map it, sell it out and. Or you can just hold it and rent it out. California is happening already. San Diego is already buying into it. Yeah. So by next year people are going to start selling their ADU because of the affordability issue.

[Host (possibly a real estate or investment podcast host)]

I think one of the questions people are listening is like, how do I do all this? Like who would do that? Who's going to go the city or the county to get it issued as a condo, to sell it off? Now would it be sold as like a tick, a tenant in common?

[Kevin Trinh]

Like, do you need an, you need to create an hoa? I haven't gone through the whole full process yet because it just started to come down to San Diego.

[Host (possibly a real estate or investment podcast host)]

Yeah.

[Kevin Trinh]

But from what I know that how it usually work is you get condomapp, you get HOA involved. Create a HOA and then it has shared water, electrical is all separate. SCG&E is all separate. So you pay separate bills and you will sell it off just like a condo. Right.

[Host (possibly a real estate or investment podcast host)]

Dude, this is phenomenal. Yeah, I mean you're right. Like you can't even really compare the two. No, the, the, the. I don't love the whole pad split concept. I get it.

[Kevin Trinh]

I get it too.

[Host (possibly a real estate or investment podcast host)]

I just. Let's just say there's no real exit.

[Kevin Trinh]

Correct.

[Host (possibly a real estate or investment podcast host)]

You're just selling cash flow pretty much. And you're dealing with that many tenants now. All the gurus. And I love most of these guys that are selling this concept. I get it.

[Kevin Trinh]

Yeah, man.

[Host (possibly a real estate or investment podcast host)]

I just like, bro, I don't have the. I don't have any hair left to lose. I don't need that many tenants.

[Kevin Trinh]

Yeah.

[Host (possibly a real estate or investment podcast host)]

In one home.

[Kevin Trinh]

Correct.

[Host (possibly a real estate or investment podcast host)]

That are going to turn over depending upon your business model. So. I love this place. Same reason I like short term rentals. I think short term rentals had its moment in the sun. I believe this could be the next wave of what needs to happen.

[Kevin Trinh]

This is the next wave, brother. This is the golden age, man.

[Host (possibly a real estate or investment podcast host)]

Because this is. I mean, you are the only one I'm aware of, really. So you said thatches.

[Kevin Trinh]

Is that just doing it? There's other players out there who, you know, buy into the ADU play, especially in the dense area.

[Host (possibly a real estate or investment podcast host)]

Sure.

[Kevin Trinh]

But you know, I've built over close to 180 use by now. Right. Just from clients and even for myself alone. So that experience alone, I mean, I don't know if there's people out there who's built this many. Right. Compared to what I've been doing.

[Host (possibly a real estate or investment podcast host)]

And 180 ADUs.

[Kevin Trinh]

I'll build over 180 years, bro. Because we've been building for clients since 2016. And then I stopped building for clients around 2021. 20. 2020.

[Host (possibly a real estate or investment podcast host)]

Do for yourself.

[Kevin Trinh]

Trying to do myself. And the reason I did for myself is actually a pivotal moment in my life. Right. Because we had some issues with construction and clients and all this stuff. You know how construction goes, bro. You went through the whole process.

[Host (possibly a real estate or investment podcast host)]

I know how construction goes.

[Kevin Trinh]

Yeah, brother. And on our side, it's not because we did anything wrong to people. It just happened to be that we grew so big that we couldn't control the scalability of it. We went from a team of 5 to 6 to 10, and we grew to a team of 70. Doing so many ADUs every year. Right?

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[Kevin Trinh]

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[Kevin Trinh]

Wait. No subscription.

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[Host (possibly a real estate or investment podcast host)]

So did it kind of crumble on itself?

[Kevin Trinh]

Crumble on itself.

[Host (possibly a real estate or investment podcast host)]

And it's not a judgment play. So. So just so everyone understands and what he's referencing too, as I was very vulnerable this last boardroom. I talk about having a 2024 that I lost $3 million. That's my money. It's investors money. And what you went through in 2021.

[Kevin Trinh]

I think it was 21, 2022.

[Host (possibly a real estate or investment podcast host)]

Yep. I experienced, and I think you're going to agree with this. I experienced this. Just because I could do it doesn't mean I should have done it.

[Kevin Trinh]

Correct.

[Host (possibly a real estate or investment podcast host)]

Because there's a story that goes. There's. There's two friends that have same everything. They're gonna build hundreds story buildings on it. One guy starts running, he's up to like 60 stories. The other guy hasn't even started yet. This guy keeps looking him. Why are these, why is this guy getting smoked this bad? Like they're buddies. They should. And next, you know, a big storm comes. As we all know, there's always a storm.

[Kevin Trinh]

Yep.

[Host (possibly a real estate or investment podcast host)]

Storm always comes.

[Kevin Trinh]

Always comes.

[Host (possibly a real estate or investment podcast host)]

The guy who had at this point, 10 stories and the other guy had 60. The storm took down all 60 stories. This guy remained with his 10.

[Kevin Trinh]

Yeah.

[Host (possibly a real estate or investment podcast host)]

And the guy asked the other buddy, like, what were you doing this whole time? Were you even working? He's like, yeah, I was underground. I was going deep as I go up. So my infrastructure was deep as I go up. That story just epitomizes my struggles in 2024. I was running really fast because I was building up, but I damn sure wasn't building down.

[Kevin Trinh]

Same with me, brother.

[Host (possibly a real estate or investment podcast host)]

Yeah.

[Kevin Trinh]

We were building up so fast. We were. We look at this ADU play like this is the time. Right. We had to go.

[Host (possibly a real estate or investment podcast host)]

Yeah.

[Kevin Trinh]

And we weren't. We didn't have the great foundation. We needed to be solid enough to grow this thing. And so that's why we crumble. And that's the other thing that I want to take this into the mindset for real estate investors that's getting into the ADU play. I mean, we all want that passive income. But passive income is not passively built.

[Host (possibly a real estate or investment podcast host)]

Right.

[Kevin Trinh]

It's passive when it's built.

[Host (possibly a real estate or investment podcast host)]

That's right.

[Kevin Trinh]

A lot of people don't realize that, brother.

[Host (possibly a real estate or investment podcast host)]

Yeah. You know, and I would even make the argument. I just never. I don't think real estate ever until you're at a true economy as a scale.

[Kevin Trinh]

I know, bro.

[Host (possibly a real estate or investment podcast host)]

I just don't like true economies of. Then you could probably argue is passive.

[Kevin Trinh]

Yep.

[Host (possibly a real estate or investment podcast host)]

Anything under a hundred, it's just. There's no way.

[Kevin Trinh]

There's no way, brother. Dude, you're still. You're still in the rat race. But again, everyone has a different end goal.

[Host (possibly a real estate or investment podcast host)]

Yeah.

[Kevin Trinh]

I have students who just want 10,000amonth, 15,000amonth in cash.

[Host (possibly a real estate or investment podcast host)]

I love that, by the way. Sometimes I wish I was that guy.

[Kevin Trinh]

I know. Me too, brother.

[Host (possibly a real estate or investment podcast host)]

I just like that.

[Kevin Trinh]

I know. That's great. 15,000. One 20,000 month requires maybe three of these properties with Adu Place. Right. You think about it. So it's very doable when you look at that approach. For me, my scalability and how I look at things is a lot more great. Like you. So definitely getting to that $100 million plus portfolio in the ADU space. And then just grow from there, man.

[Host (possibly a real estate or investment podcast host)]

Just remember, build deep, build up.

[Kevin Trinh]

That's right, everybody.

[Host (possibly a real estate or investment podcast host)]

Kevin Trinh. If you're interested in what we just talked about, which I'm incredibly interested in, you have a mastermind coming up. Hit him up on Instagram. Kevin. Is it just Kevin Trin or the Kevin Trin? I think I started that. The. Just. Anyways, this guy's phenomenal. He's in my mastermind boardroom. It's really one of the smartest in the space. Comes with the contractor's license. Hit him up, ask questions. He is a genuine human being. I really appreciate you.

[Kevin Trinh]

I appreciate you brother. Looking forward to talking more about it.

[Host (possibly a real estate or investment podcast host)]

On the next one 100%. Guys, if you like this and you think a couple people need to hear this, please share this with two of your friends. I appreciate you and we'll see you on the next episode. Peace.

[Kevin Trinh]

Peace.

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