How ADUs Can Increase Your Rental Property's Cash Flow

The Myndful Investor Podcast

How ADUs Can Increase Your Rental Property's Cash Flow

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Show Description

Did you know that accessory dwelling units (ADU) are a great way to add value to your portfolio and have a positive impact on communities? Many states, led by California, are passing legislation that now allows for ADUs to be built within single-family units. This presents a great opportunity for investors and customers alike!

Today on the show we have Erik Preston from Habitat, who will explain how ADUs work in different scenarios. We will go through the legislation, pros and cons, and the nitty-gritty of actually building an ADU. Tune in if you want to learn more about this incredible investment opportunity!

What We Cover‍

00:06 - Introduction to the subject of ADUs, the California legislation, Erik’s personal and business background.‍

05:53 - What different types of ADUs exist and what are the prime locations where they can increase the value of your property.

10:50 - What happens with the line between single and multi-family units when ADUs are built.‍

12:57 - The barriers and obstacles of building ADUs in terms of parking, HOA rules, and similar.‍

18:54 - The process of selling or buying properties that have ADUs on them.

21:02 - How does an investor approach adding an ADU to a single-family property, in terms of legislation, permits, and keeping the tenants happy.‍

26:57 - What kind of returns on investment can be expected from ADUs, what problems are solved, and what is the potential for growth.

31:14 - How Erik and Habitat can help you plan, develop, and build ADUs on your properties to see the maximum benefit to both you and the community.‍

35:24 - How to get in touch with Erik Preston and learn more about what Habitat has to offer.

Watch the Podcast

Read the Transcript

Steve Rozenberg  00:06
All right, ladies and gentlemen, welcome to another episode of the Myndful Investor podcast show. I'm your host, Steve Rozenberg. And I am proud to represent Mynd Property Management, I'm head of investor education for them. And we're doing this as well. We're recording this, and we're also doing it live on Facebook. So we kind of like to give people time to jump on, and they can understand what's going on. The reason we even have this show is that there's a lot of information out there. Look, there's a lot of podcast shows, there's a lot of gurus, there's a lot of other people that do stuff. But there's not a lot of people that tie in investing, creating wealth, and doing it day after day, month, after month, year after year, to actually see that wealth. And I think it's something that I personally have not seen. And I think it's something that's missing in the industry. Because just because you buy a deal doesn't mean you're going to make the money on the deal for the next 10, 20, 30 years and having the right business model, hearing from people that have been doing it, hearing other strategies about how you can do it, I think is very, very important. And at the Myndful Investor show in Mynd Property Management, what we're trying to do is we're trying to educate you so that you realize there's not a one size fits all, there never is there never has been. Sometimes it's whoever talks the loudest on the internet and social media is what actually gets the attention. And there are other things that are sleeper ideas that most people don't know about have never heard of, but can be a great source of making money, a great source of building wealth. And that's kind of what we're doing on this show is we're giving you all the different perspectives. Not just the good, but the bad. You know, I talked to a lot of people that have a lot of challenges. And one of the things that I've learned is that everybody has a different way of doing it, number one, and number two, there is no right or wrong way. And you will fail, chances are statistically you will have challenges. And you will learn from those challenges. And you can champion them and learn them as lessons. Or you can take them and they can be the demise of your whole business model because you don't learn the lesson. So today, we have Erik Preston who is with Habitat ADU. And I'm gonna let Erik tell his story. But what an ADU, as an auxiliary dwelling unit. And those are ways to basically add revenue at a revenue stream by increasing the value of the property. And I'm probably butchering this all. But it's a way to basically add value in a revenue stream to an already existing piece of property. So Erik, thank you so much for being here today. I really appreciate you coming on.

Erik Preston  02:47
Yeah, thanks so much for having me, Steve. I'm excited to be here. Basically, what's going on is that starting January 1 of this year, California passed a series of sweeping new legislation that took a previously niche product at us, which stands for the accessory dwelling unit, and made it mainstream. So the state of California came in and said, you can add an A to you or to add us to any property effectively taking a single-family home and turning it into a triplex or taking a four-unit property, making it a sixplex and made it pervasive. So what was previously incredibly difficult to build is now almost a constitutional right in California to be able to add units to your property. And as such, over the course of this year, we've seen a ton of excitement and interest from investors. So I'm here to sort of evangelize this investment opportunity, to talk a little bit about how it works. So a bit about myself personally.

Steve Rozenberg  03:46
Yeah, I first let's start, I'd like to hear a little bit about you. I mean, how do you even get into this kind of type of business? And like, what's your background? And then also after that, can you kind of go into a more of an explanation of ADU because I haven't got the, I got the definition wrong. I thought it was auxiliary. And it's not.

Erik Preston  04:04
So let's hear a little bit about you my personal background and then a little bit about Habitat and then we'll jump in 80 years. But yeah, overall, very excited to help evangelize and educate all the listeners about this investment opportunity. So I'm from the Bay Area in California. Originally, my career has been effectively a series of different prop-tech startups in Silicon Valley. Most recently, I was the head of new product operations at Open Door, which is going public this month. A lot of listeners might be familiar with open door openers. Operational markets, basically a product or service made it very easy to buy or sell homes online. I left in March and was extremely excited about joining a new early-stage startup. One of the founders of Open Door it's also one of the founders of Habitat. And what caught me particularly excited about Habitat is that it has regulatory tailwinds so often when we're looking at new innovative real estate solutions, They're playing in a legal or regulatory gray area. And the ad space is clearly backed by legislators. And every month, it feels like there are new laws coming out or new lending guidelines coming out to make it even more accessible and more pervasive. So I was super excited to join something early stage that the state was really behind. And I also think it does a tremendous amount of community and social good, which, which had me very excited as well, we're adding housing into communities that need it without disrupting the fabric of those communities. But adding much-needed density to areas where affordable housing has been an issue while still providing great returns for investors.

Steve Rozenberg  05:41
So it's just it's almost like you're squeezing more juice out of the orange kind of, right. I mean, you've already got the footprint of the house. Yeah. And so you're just squeezing a little bit more.

Erik Preston  05:53
Let's talk about what an ADU is because they actually came in many different shapes and sizes, so it is a stand for accessory dwelling units. Previously, they've had many other names, second units, in-law units in law flats, granny flats, cottage homes, carriage homes, garden homes, garage conversion homes, basement units. So it's actually a pretty broad category. And the state of California has taken a stab at defining it broadly to be inclusive of all of these different types of sort of secondary units on a property. So the simplest way to think about an ADU is I own a single-family home. That is a one-unit property, it's zoned single family. And somewhere on the property, I'm going to add a new liveable permitted accessible unit. And it's going to effectively turn the property into a duplex where, where before I had room for one family and one income stream, I now have two different units that are both rentable and liveable. For two families with two income streams, it doesn't actually technically turn the property into a duplex. It's adding a special type of unit called an accessory unit that's defined effectively by the permitting process one goes through in the state of California. Now, it's not just California, by the way. Portland is probably the leader in the United States in terms of its penetration rate for the 80s. Seattle, not too far behind. And in the greater North American continent. Actually, Vancouver is blowing people away and at development. 30% of all single-family homes in Vancouver have an accessory unit, which is pretty incredible California that way less than 1% penetration right now. So I think we will see an explosion of growth and development in this space, people adding second units to their properties, or third units and fourth units with the new legislative tailwinds. That has made it so easy. I want to follow up on this point by talking about different sort of different types and permutations of the ideas that we see. So if I have a garage that's detached from my property, and I convert that to a livable unit with its own entrance, egress, bathroom, kitchen and living, living and sleeping space, that's called a garage conversion do, you can do the same thing, say with a basement and sort of getting that up to code and permanent very quickly and easily now, adding those same features to turn it into an ADU. Typically, you see them bucketed into two groups attached or conversion ADU use. That's where a second unit is added within the existing sort of liveable envelope of an existing property or a detached view, which is a new structure built in like a backyard or a side yard that's completely standalone and separate from the primary residence.

Steve Rozenberg  08:45
Now, I have a question are you seeing is the reason that this is happening more, we'll say more juice getting squeezed out of the orange have a footprint of a property? Is this more prevalent in markets that are already tough to like they're landlocked, they don't they can't grow anymore. So they're trying to kind of build on top of the other is this? Is this the solution for the San Francisco Seattle's LA is of the world? And it's Are you seen this, like across the country or only areas that are severely landlocked?

Erik Preston  09:19
Well, it's certainly a product that is more helpful in more urban markets. It doesn't have to necessarily be you know, downtown city center, we see a ton of ADU development in the suburbs, where there's a demand for more density and more housing but still a lot of space, right? If I have a 6000 square foot lot with a single-family home, there's plenty of room in my backyard to add an 800 square foot two-bedroom unit, I still have a backyard, create a totally separate egress and entrance for that second unit and still charge really high rents on that property. But you are I really do feel like you're doing a lot of social and community good as well. It's very environmentally friendly. stainable a lot of these new units coming up are very green, you're reducing commute times you're keeping families closer to their place of work. You're adding home affordability and more units into areas that need it. And for an individual homebuyer, you're making that acquisition of a new property more affordable as well by giving them an additional income stream to help support the finance on the property. So a ton of social and community goods. It's less valuable in more rural areas, right, the further out you go, there's less of a need for additional housing and additional density. But in the suburban areas, and of course, in the urban areas, to be able to add livable units just helps create more home affordability and more desirable locales for folks to live that are closer to their place of work.

Steve Rozenberg  10:50
So let me ask you this in I don't know the strict California codes, but let's say for example, in Texas, when you go from four units to five units, do you start getting into the multifamily legal aspect? Does that come into play in California? Like once you get a certain amount?


Erik Preston  11:08
Well, legal aspect as much as it's a lending aspect, right? That's the four to five units is really where you see this distinction between residential lending and commercial lending. So it's actually an incredible question, Steve, because it, First of all, doesn't happen that often right? The vast majority of ADU developments are single-family homes, adding one to two units. So they're just going from 123.

Erik Preston  11:33
But multifamily investors like I'd say, in the last two months have realized, Oh, my gosh, there are some tremendous changes that just happened. And all of the things that I used to just try to avoid, because they were so burdensome with adding units, or doing renovations with the permitting with the entitlements that were so impossible and so difficult to go through, are now incredibly straightforward and easy. And there's a way I have a six-unit property, I can add two units, the cap rates are through the roof, be phenomenal. So obviously, going from one to two, or going from six to eight, keeps you in the same bucket of financing. We have a few customers now, a customer named sort of ironically, Preston in Santa Cruz is doing his a four-unit property. He's actually adding three units to detached at us and then doing a garage conversion as well. So we'll be adding three units to the four-unit property. And we're actively working with lenders to try to figure out how they want to finance the thing. It's really confusing, and it's a very innovative and emerging space. And I think why there's such an investment opportunity, right? When this is all figured out and laid out very cleanly and neatly. The prices on all of these units are going to jump through the roof as everyone realizes how easy it is to add the units and accrue additional income. But right now everything's mispriced because there are still some unknowns to figure out that looks like there's a straight-line path and aren't super fleshed out yet.

Steve Rozenberg  12:57
Yeah. So you know, as you were talking, I was thinking in my mind what happens when, and again, I'm just thinking, Okay, he's got these seven units now does he have a parking problem like just is there are so many parking spots he needs to have. And all of a sudden, now the HOA comes back and says, wait a second, you may have the permits, but this doesn't. And again, I'm maybe it's going down some rabbit hole. And I think why investors are just starting to catch on now. Right? There are all these barriers and problems that come when you add second units. Yeah, remember that functionality and a livability standpoint as well as from a regulatory standpoint? Right, like, sure. I got the building permits, but what about the planning permits? I've got them planning permits, but I don't have room for parking anymore. So maybe we should talk a little bit about what is the set of legislation that California passed because it effectively removed all of these problems? Yeah, that's great. I'd love to hear that. Local governments and cities used to put in place and said these are no longer valid. We're coming over the top state law is superseding, we want to encourage more housing being built. And there's been an epidemic failure at the state or the city and local level to provide a general plan that allows for these units to get built.

Erik Preston  14:22
So series of laws that were passed, just went active this year, the first thing is that effectively all single family zoning in the entire state of California was ended. Every single unit has the right to add both in at you and a junior radio, no matter what. You need to have the space to add the radio and historically, cities made that very difficult. They would have floor area coverage requirements or maximum unit size is all sorts of burdens that were impossible for individual owners to clear to get us to bill the state of said you are no longer allowed as a local city to place any restrictions on things like that. unit size or for ratio. So they've standardized it at the state level. And said, if you're building a one-bedroom, you can build up to 800 square feet, or one, if you're building a two-bedroom, you can build up to 1000 square feet no matter what. The only requirements in terms of size are that it must fit within the space of your lot with four-foot setbacks from the rear and side property lines. So no matter what your local zoning or planning department says, if you can fit in at you, that's 800 or 1000 square feet within those four-foot setbacks, you're allowed to build a do and you come over the top of the local zoning, parking was mentioned. So two things that are good news for investors around parking, if you are demolishing, removing, replacing, or converting a garage, or a carport or any type of covered parking structure to build an ADU, you do not have to replace that parking. Similarly, if you are adding a new unit, and the city used to say that the new unit must have parking, as long as you're within a half-mile of some sort of public transit, accessory units have zero parking requirements that the city is allowed to impose. Maybe the single biggest thing the state has done is said these are now ministerial reviews, rather than discretionary reviews to get your permits approved. So you effectively skip the entire planning department and just get rubber-stamped at the building department. And all 80 permits must be approved in 60 days or less. Wow, from the time you submit your completed permit packet, local cities are required by state law to just check a few boxes and rubber stamp them in less than 60 days. And that's you know, change the paradigm of editing and planning and getting these new units approved.

Steve Rozenberg  16:46
Yeah, it's interesting. I remember I was speaking at an event. My friend Jay Martin had an event in San Francisco, probably about six months ago, and a gentleman there that was speaking, I was talking to him and he was talking about ADUs. And he specialized in a very niche area Los Gatos, and he said, I said, Oh, you know, we started talking and you know, what's your superpower, and blah, blah, blah? And he said, Well, he said, I build, I do ad use. And I said, Oh, I said, Okay, that's cool. And I said, What, what's the model that you have? And he says 400 square feet. And I said, What? What do you mean? He said, All I do is 400 square feet, not a foot more or not a footless? So as I started digging in asking questions, he said, anything over 400 square feet. I require it requires a permit. And he said, I know my numbers, exactly what it takes to get 400 square feet what it does to the value of the property so much per square feet, what I can rent it for, and he says I know my margins, I know exactly what I need. So that's all he looks for us houses that he can add the 400 square feet because he did not pull the permit, which maybe it sounds like now.

Erik Preston  17:53
Yeah, me too. Sounds like you were talking to this gentleman in 2018, 2019.

Erik Preston  17:58
Yeah, it's about is about a year ago, I believe. Yes, it was a little while ago, here, instead of 400 square feet, it's 800 or 1000 square feet. And that really allowed it doesn't apply to completely bypass the permitting process. But say like 80 or 90% of the permanent process, you can bypass. And you can do these in a variety of different ways, right, you can custom stick build the most luxury 799 square foot at you that you want. And then we've got our founder is doing an investment project in Santa Rosa. The primary residence is like 600 square feet, and he's putting in a 1200 square foot super custom tricked out at you. The alternative is also possible, right? You can go down to 500 square feet, fit it into a very tight area, sort of like a studio, do it prefab, and get the whole project done. And under 200 K, which is very affordable in California.

Steve Rozenberg  18:54
Yeah, no kidding. Now, let me ask you this. And again, I'm just I'm the train of thought as we were talking before about, you know, getting the loans. I'm thinking let's see, I go to sell this property. And now I have an ADU on it. Right? What kind of lending Do I have to get for the buyer who if I'm a buyer, does that affect the lending that I have to get in the type of insurance and all that,

Erik Preston  19:18
I think is in the single-family home space. Most of these financing issues have been solved already. In the multifamily space, there are probably still some things that are like working their way through the system. But let's say I have a single-family home. And I've added a detached ADU, maybe I did a garage conversion or I did a prefab 800 square foot unit. It's actually still considered in lenders’ eyes, a single-family home and really in the city's eyes, it's still considered a single-family home as well and it's just got this specially designated accessory unit, which is different than a duplex. So your buyer is going to use the same loan that they've been using their whole lives right like if you're You're looking for just a regular consumer single-family home buyer. Fannie and Freddie love ideas, they have a special set of rules that designate very clearly how to treat it to use, they have instructions for appraisers on what they need to do to help add additional value to the single-family home because of the presence of an ADU. They actually just Fannie and Freddie both in the last month actually just updated their guidelines to make it even easier and simpler for appraisers to appraise the single-family homes with accessory units and add additional value to the property because of the presence of that second unit, which provides incredible optionality. Right You can, you can think of it as a buyer is just additional square footage. But it's also a rentable second unit, right, you can live in the primary rent at you have your mortgage paid for. So that additional option. optionality and space that has so many different uses is very appealing to a lot of buyers. So if you're planning on a Fannie Mae mortgage,

Steve Rozenberg  21:02
So let me ask you this. Now I'd like to get into some tactical type questions here for you because you've obviously done this and you see the value. So let's say I'm an investor, and I have a single-family rental. And I'm now I'm looking at the backyard. I'm going you know what, I could add another maybe two to that thing. How do I go about doing this? And how do I more specifically, how do I explain to the resident that they had a single-family house, and now they're basically going to be part of a duplex or triplex?

Erik Preston  21:31
Sure. So let's just use the most straightforward baseline case, which is like a single-family home, that's rented out to a tenant. So what this what the state of California says is, if you want to go through this streamlined, expedited ministerial review process that takes less than 60 days to get your ADU is approved, you're going to be allowed to build one Junior radio, which is a less than 500 square foot unit that's within the existing envelope of the home. These Junior ideas are not particularly appealing for investors to me, because the city can still require owner occupancy for those generators to be rented. So I would just sort of like put those to the side for now. But we can also build on all single-family homes, one detached ADU and the K one of the new state laws is that the cities can no longer require any owner-occupancy anywhere on the property to be able to rent both the detached ADU and the single-family home. So what do I do tactically to figure out what I can build, I just as a starting point, probably should start thinking one detached ADU, because that's how I get into this very simple ministerial review process. So the first thing I can do as a homeowner or investor is just going to look at my backyard and get a rough idea of how much space I have, right, you can actually go on Google Earth, and there's a little measure distance feature that allows you to get rough dimensions for your backyard. Generally, I think you're looking for something that's at least 30 feet by about 50 feet of available space. Okay? The reason for that is that you're going to have a fire setback from the primary residence and about seven to 10 feet for safety. I also think it's just good for tenants to give them some distance and some space. And then you're going to want to go four-foot setback from the rear inside property lines. And what's left in the middle there is your buildable envelope. You know no matter what, if it's a one-bedroom, you're going to be able to build up to 800 square feet. And if it's a two-bedroom, 1000 square feet, potentially more. And then you want to get a feel for the general character of the backyard, is it flat, the right flat is going to be much easier to build foundations going to keep your cost down. One thing to always be aware of, if you're building prefab, specifically, if you're building modular manufactured housing, which is oftentimes much more affordable, and you're sort of shipping that and installing that in the backyard powerlines can be very prohibitive for that installation process if a crane is required. So we always like to ask homeowners to take a look for major power lines in the back or front of that of the property. Those can make the installation of a prefab unit much more difficult or impossible. The other thing you want to get a feel for his site prep required right? Are there sheds that need demolition, are there trees that need removal? All of those things are possible to do it just may add cost to your project. Another good initial step that a homeowner investor can take is contact or just sort of Google around on their local cities. At policies. We mentioned that the state of California has come in over the top and sort of implemented standardized guidelines statewide. But a lot of cities actually really encourage 80 years. They view it as the solution to the housing crisis that can be implemented without disrupting the neighborhood. So they have websites promoting at us providing how-to guides that are free for homeowners or investors. There's a lot of great information you can get there and specifically what the Quick and easy permitting process is what maybe pre-approved vendors for that city are, what costs the investor might consider. And once you've done that, I mean, it's time to start getting proposals and getting quotes and assessments. So there are a lot of different types of videos out there, you can stick build with an architect, an engineer, go through the GC bid process, and kind of manage that process yourself. There are prefab companies like habitat that do either modular manufactured housing, what we see in California is that those are really two things a lot less expensive, because you're getting geographic arbitrage on the construction costs building off-site in a factory where costs are lower and more controlled. And then the second thing you get is a lot more simplicity and control over the process, right, you have fewer things to wrangle and manage. It's really simple, convenient and turnkey, to do a sort of a prefab radio. But an investor should compare and contrast, get a few different quotes, make sure you're comparing apples to apples on every line item of costs, including things like Foundation, trenching for utilities, finishes, permits, etc. Get a feel for the different design options that are out there and pulled the trigger. That's the main thing is there's a five-year window in California right now that grandfathers in any ADUs permitted during this period. So that they can never be required to have owner occupancy in order to rent both units. And that five year period will end in about four and a half years. And at that time, it's not clear if California will renew those policies or not. So now is really the time to build and add sustainable units to your community and increase the heck out of your returns and cap rates on your properties.

Steve Rozenberg  26:46
So let's talk about returns like if, you know, obviously, it could be an expensive endeavor, right? To go ahead and do this. And it's a big-ticket item, no doubt.

Steve Rozenberg  26:57
Right. So what is the ROI? What kind of returns should I expect from doing this? Now? I know that's a very tough question. I get one, how much should I be looking to add to say this makes sense for me to do this? Or it does not?

Erik Preston  27:13
I mean, I definitely think that any listener needs to do a deeper evaluation of this specific property because there are so many factors from the permitting fees that might be implemented in your local area, to the cost of labor and construction, to your method of design and build to what the rents are in your area. One thing I'll say and Habitat is we're happy to do very free, very quick virtual assessments of any properties or prospective properties that customers are looking to buy to let you know, yeah, yes, this is a feasible project. And here's what we'd expect, roughly on cost, we can do that very quickly and easily upfront. But just like to do sort of an example case, right. So what we've seen in California is that 80, US have the best returns in more expensive areas. And the reason for that is that the rents are higher, but the cost of construction is generally constant, especially if you're building prefab off-site in a factory somewhere in a less expensive area where you've got sort of assembly line machine precision building these homes at a lower cost. So the fundamental structure of either return is so good. And let's just take a base case is that if I already own a single-family home in an expensive high rent area, I've already paid for the land, I already own the land and it's effectively and essentially free. There's maybe some very small opportunity costs in creating a smaller backyard for tenants, which might mean you have to reduce your rents very slightly for a primary residence like on some my new level, but effectively free land that you're not getting any revenue or income from today. And it's just sitting there in a high rent area. And if we can go off-site elsewhere and buy a unit that's a low cost, and then ship it and install it in a high rent area on land we already own the returns are off the charts. So I'll just give a sort of an example from a project we're doing an Oakland single-family home as I described investor already owns the land this is a property that they already have in their portfolio, huge backyard. You know maybe a very small premium on the rents for the primary as a resolve plenty of space to maintain a large backyard and add a second year. rents are high in this area I underwrote the rents for a three-bedroom apartment in the area 3500 so we'll very conservatively say the rents will be 3000 and as part of open to buy a three-bedroom condo in this area would easily be 600 700 $800,000 we can build Build a prefab at you for $250,000 shipping install. So exact same size of the unit, exact same rental income stream at $3,000 a month conservatively, cost to acquire or build or construct instead of $600,000 $250,000. So as you'd imagine, when your construction costs are so low, but your rents stay the same, your returns going to be very high. So for that project cap rate was 10.68, which is, you know, double, or maybe getting closer to triple of what you'd see in the Bay Area. Typically, if you can get any sort of financing for the project, which is actually fairly straightforward. If you have some existing equity to borrow against, right? People lever these 100% cash on cash returns 1617 18%, very reasonably, some cash on cash returns, quite frankly, infinite because zero cash was required to be put into the project people levered 110%. So in the Bay Area, those returns are off the charts. If I had a steady flow of deals like that, I'd be raising my hand to invest all day.

Steve Rozenberg  31:14
Yeah, all day long. So that Okay, that makes sense now, so what does Habitat do? Like? Why? Why would I use you guys? What what what, what do you facilitate for PETA?

Erik Preston  31:24
Well, first I want to say is, our mission is to help solve the California affordable housing crisis. So we do have a lot of customers that come to us and we take a look at the project and say, you know, there's actually a competitor out there, that might be a better fit for X or Y reason, maybe there are giant power lines, we just can't install. So we're happy to recommend a builder and an architect, I really do just want to encourage people to check out multiple vendors and explore all their options to find the best solution for them. In a lot of cases, habitat can be the best fit. We have a somewhat unique approach to space, which is that we're building to HUD code we're doing manufactured home at us. There are some trade-offs there. But the big benefit is that it's substantially lower cost even just coming right off the factory line, a fairly identical unit to a State and Local Code modular home, we're going to be 30 4050 k less expensive. And then on top of that the ecosystem of vendors and subcontractors in the space, generally less expensive as well. So compared to stick belt, we should be 300 $400,000 less expensive for an 800 square foot detached at you. Compared to like another prefab modular company, we're probably still 50 or 100 k less expensive all in. So really, that's the first thing to get across about Habitat we strive to incentivize accessory dwelling unit construction. By being the lowest possible cost provider and driving costs down as low as possible for the developer, the investor, the customer. The second thing to know about us is that we are turnkey and we're a really great fit for someone that doesn't want to deal with the hassle and uncertainty of wrangling a complex construction and development project. We handle everything from A to Z, we do your permits for you we have in house permitting experts that deal with the local cities to get these things ministerial approved. We have sort of constrained pre architected pre-engineered design options, so the customer doesn't have to hire an architect. We handle the foundation, the utilities, connections and trenching, the unit itself, the delivery, the install the finishes, and all of our units come with a seven-year warranty. So for the investor out there, that's looking for the highest returns as a result of the lowest possible cost. And once a super convenient simple process, we may be a good fit. Everything we do is detached single story, it is a little bit more flexible than the gentleman you met who only did 400 square feet, we have nine different floor plans ranging from about 430 up to 1200 square feet. But if you're looking to do a garage conversion or a basement conversion or like a, an attached ad you that's not us. We don't do that, but we're happy to recommend someone that you work with who does specialize in that space.

Steve Rozenberg  34:12
Great. Well, it's good information. And I think it's like you said it's definitely a bigger it's for a bigger challenge than we have. It's not just for you guys to you know, make some money doing construction. So I like the fact that you guys are doing something to solve a problem out there. And it's not just a California problem. It's you know, yeah, the country.

Erik Preston  34:33
I wanted to flag for sort of the national audience as well. I've talked a lot about California because that's where we're based and where we operate. It's also where the entire state has come over the top and said all of you local cities and counties that used to make building it is impossible. It's possible now we're coming over the top, but Portland huge at population Seattle, a very pro at you and we're starting to see this happen more and more in suburban and urban areas across the country in North Carolina. It has gotten very ADU-friendly. Parts of Florida, Atlanta, parts of Texas are seeing similar movements. Usually, you see the regular regulators in the legislation lead. And then the investors, the developers, and the homeowners follow, as it becomes less prohibitive and far more expedited to build any use across the country. Great.

Steve Rozenberg  35:24
Well, Erik, how do they get ahold of you if they want to find you and talk with you more in depth about this?

Erik Preston  35:30
Yeah. My email personally, is erikhabitat@yahoo.com. I feel calls from interested investors, developers, everyday mom and pop homeowners, realtors agents all the time. So again, that's erikhabitat@yahoo.com. You can also go to our website where we have a ton of good information about local laws, different models, we have the general process to build an idea. And that's habitatadu.com.

Steve Rozenberg
Great. And do you guys have any, like Facebook groups or social media stuff that you do? Or is it mostly the website and then emailing you?

Erik Preston
We certainly have a Facebook page. But most of the good information that I would want, if I, you know, as an ambassador would be on the website, we do have sort of like a monthly webinar series as well, for people that are looking to stay a little bit more arm's length, but still Sure, get more information. I also I do a lot of these, as well. So you know, I was I was on a Realtor Association webinar just yesterday. So you may see me around in other places as well.

Steve Rozenberg  36:35
Great, great. Well, Erik, look, I appreciate you coming on. I love the fact that you guys are doing something and you're you know, you're basically keeping the footprint of real estate the same, but you're adding more value, which is you know, that's what it's all about. It's your increasing profit margins.

Erik Preston  36:49
Yeah, everyone out there who owns a 10 unit property, effectively, the state of California said you now own a 12 unit property. Or if you own a six unit, it's now an eight unit property. It's just a matter of going through the very simplified process of getting some stamps, buildings made use quickly and easily and adding two more rental income streams to your multifamily property.

Steve Rozenberg  37:09
Yeah, no, I think it's great. I think it's great. Well, Erik, again, thank you for being on today. I appreciate it. Again, for those of you who want to find out more information, it's habitatadu.com. As for myself, and Myne Property Management, I want to thank everyone for watching today. If you want to know more about managing your asset, we're in over 19 investable markets nationwide, much of where Erik was talking about and then many, many more, go to our website at mynd.co. That's mynd.co. There you can find all the information, video content, educational platforms, everything you need. We can also help you find a property as well if you're looking to get help in that realm. So on behalf of Erik, myself, and Mynd Property Management, thank you for watching. We'll see you guys next week on the Myndful Investor. Bye, bye.

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Meet Erik Preston

Erik Preston is a business development leader at Habitat ADU, with a background in product operations and BizOps. His experience includes building and scaling new services at unicorn SoftBank funded startup (Opendoor), on the founding team of startup with $13m cash exit (Lovely) and as Director at 900 person PE owned web portfolio (RentPath).

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