How to Unlock Your Home’s Hidden Passive Income Stream (ADUs 101)

BiggerPockets Real Estate Podcast

BiggerPockets

Education, Business, Investing

4.8 • 16.5K Ratings

🗓️ 19 March 2025

⏱️ 40 minutes

🔗️ Recording | iTunes | RSS

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Summary

There’s a hidden passive income stream in your basement, backyard, or garage, and only one investing strategy can unlock it. More and more homeowners and landlords are using this strategy to pay their mortgages, pad their pockets with cash flow, and increase their home values significantly. Of course, we’re talking about ADUs (accessory dwelling units), the rental properties that states are begging you to build, and you can do so right now with the home you already own. To help you affordably (and profitably) build your first ADU, we brought on Derek Sherrell, AKA That ADU Guy, to give you the beginner steps to your first attached (or detached) investment. We’re walking through which properties have the best ADU opportunity, how much an ADU costs to build or convert, how much an ADU will make, how to fund and finance your first ADU, and how Derek builds an ADU from scratch in just 90 days! Derek often makes an infinite return on his ADU investments, and he’s teaching you how to do the same! If you’re in an expensive state like California, Oregon, or Washington, this strategy is even more effective as you can collect more rent AND do so without local regulations slowing down your ADU progress! In This Episode We Cover: How much an ADU costs to build, and the wild returns Derek is making in 2025 The most affordable ADU conversion that will boost your property’s cash flow Three crucial beginner tips when designing and building your first ADU How to finance your ADU conversion/build and why Derek loves HELOCs Best states for building ADUs and who to call BEFORE you decide to build And So Much More! Links from the Show Join BiggerPockets for FREE Let Us Know What You Thought of the Show! Ask Your Question on the BiggerPockets Forums BiggerPockets YouTube Apply to Be a BiggerPockets Podcast Guest! Maximize Your Real Estate Investing with a Self-Directed IRA from Equity Trust Save $100 on Real Estate’s Biggest Event of the Year, BPCon2025 Grab Dave’s Book, “Start with Strategy” Sign Up for the BiggerPockets Real Estate Newsletter Find Investor-Friendly Lenders Is Building an Accessory Dwelling Unit (ADU) a Worthwhile Investment Derek's BiggerPockets Profile Derek's Website Connect with Dave Check out more resources from this show on BiggerPockets.com and https://www.biggerpockets.com/blog/real-estate-1097 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [email protected]. Learn more about your ad choices. Visit megaphone.fm/adchoices

Transcript

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0:00.0	There may be a hidden passive income stream in your basement right now, or in your garage,
0:06.2	or your backyard.
0:07.8	Today, we're breaking down one of the most powerful ways to add cash flow to your investment
0:12.4	properties or even your primary home.
0:19.2	What's up, everyone?
0:20.3	I'm Dave Meyer, and this is the Bigger Pockets podcast, where we teach you how to
0:24.4	achieve financial freedom through real estate investing. Today, we're talking about accessory
0:29.2	dwelling units or ADUs, and if you're not familiar with this term, it just means a second
0:34.4	living space on one property. That could be closing off a basement or an attic to make it into an apartment.
0:40.7	It can mean putting a tiny home in your backyard or converting your garage into a separate
0:45.4	unit.
0:46.5	And this strategy has the potential to massively improve the earning potential for any property.
0:52.8	Just think about it.
0:53.5	Creating an ADU can be as simple as
0:55.7	putting up a couple of walls, and it can add an entire new rent check into your pocket every month.
1:02.5	Joining us on the show today is Derek Sherrill. You may know him as the ADU guy. He's an investor
1:09.2	who built his first ADU when he was still in high school
1:12.2	nearly two decades ago, and has been leadingly charged on this affordable and profitable
1:17.8	real estate venture ever since. Derek is going to explain to us how to find properties
1:23.5	that are undervalued because of their hidden ADU potential, share which ADU options can
1:29.1	generate the most revenue for the lowest cost and much more.
1:33.1	All right, let's bring on Derek.
	...

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