Updated 7 months ago on .
Tired 2/1 turned into 2/2 with an ADU
Investment Info:
Small multi-family (2-4 units) buy & hold investment.
Purchase price: $48,000
Cash invested: $40,000
Sale price: $150,000
A true win-win. We bought a small 2/1 in 2019 for $48k, put about $45k into renovations, and turned it into a much more livable home and what was a shed became an ADU. It rented quickly, never sat vacant, and in 2025 the tenants loved it enough to buy it from us for $150k. Along the way, I learned valuable lessons about livability, occupancy, and creative problem-solving.
What made you interested in investing in this type of deal?
It was a small and cute house in the best school district, in the path of growth, and had a shed the previous owner had put some effort into. Long-term, the location also had potential to convert into a great commercial property (and still does).
How did you find this deal and how did you negotiate it?
Surprisingly, this one was on market. It had been listed for way too much and sat there for way too long. I knew the realtor and was upfront that I didn’t want to insult the seller, but it would work for me as a rental at $50k. During due diligence, some issues came up and we ultimately landed at $48k.
How did you finance this deal?
We used traditional bank financing, but I also rolled in a 1031 exchange, which made it even more appealing.
How did you add value to the deal?
We converted wasted dining space into a half bath and a large closet, and the layout flowed so naturally. Repainted interior & exterior, improved curb appeal with landscaping and shutters, and tackled a very large deck. Decks usually aren't my favorite because of their maintenance costs, but in this case it created great outdoor living space that made the home much more enjoyable and functional. The ADU became its own story.
What was the outcome?
Before closing, our contractor, who was single and looking for a place to stay, agreed to move into the detached structure and live there for free while transforming it into a ADU. Once the project was complete, he stayed on and began paying $400 a month, while the main house rented for $1,000. After 6 years w/ almost zero vacancy, the tenants bought it from us for $150,000.
Lessons learned? Challenges?
The more livable you can make a property, the better your profitability. I also learned the value of being creative with contractors and tenants. Our arrangement with the contractor turned what could have been a more money out of our pocket into a win for everyone.
