5 Mistakes Investors Make with ADUs — And How to Avoid Them
Investing in Accessory Dwelling Units (ADUs) is one of the most powerful strategies for building wealth in today’s housing market.
Unfortunately, not everyone knows how to play the game.
In fact, most investors are making rookie mistakes that leave piles of cash on the table or, worse, send them spiraling into financial chaos.
“If you know what to buy, where to buy, and who to target, you’re already ahead of 90% of investors out there,” Thach Nguyen told PropertyRadar.
The problem? Most people don’t.
They plunge in blind, ignoring zoning laws, targeting the wrong properties, underestimating costs, or just plain missing the creative opportunities staring them in the face.
But you’re not here to make those mistakes. You’re here to learn how to dodge them.
With a little guidance from Thach — a pro at navigating zoning laws and spotting hidden opportunities — you’ll be set to make smarter, more strategic moves.
From understanding local regulations to mastering creative targeting, we’re breaking down the five biggest ADU mistakes investors make — and how you can avoid them.
Let’s get into it:
#1: Not Understanding Local ADU Laws and Zoning
Ignoring local ADU regulations and zoning could cost you big time — both in headaches and missed profits.
Many investors either overlook or avoid the complexities of zoning laws, but that’s a costly oversight.
Cities like Seattle and areas throughout California are redefining ADU potential, increasing property values by an average of 25–34%.
“Seattle’s the only city right now that actually gives you a separate parcel number when you build an ADU,” Thach said. “That means you can sell individual houses separately, which is a real breakthrough. And you don’t have to live in the front house to have the one in the back.”
In other words, you’re not just adding a rental unit — you’re creating a brand-new property that can be sold on its own.
This is Monopoly-level brilliance.
Why? Because properties with ADUs are appraised as standalone homes, not duplexes.
And here’s the catch: California is about to join the party, sparking a feeding frenzy. This isn’t just some dry zoning regulation — it’s the future of maximizing property value.
Cities are turning to ADUs as their golden ticket for solving housing shortages. As Thach puts it, “Keep up to date, since regulations are evolving rapidly in major markets.”
Translation: Don’t wait — opportunities like this won’t last.
Study Like Your Wallet Depends On It (Because It Does)
If you want to succeed with ADUs, getting a deep understanding of local rules isn’t optional — it’s absolutely essential.
So…
- Understand Lot Size Requirements: Not every lot is eligible for an ADU. Research the minimum lot size allowed in your target area. This information is usually available through city planning departments or online municipal code libraries.
- Learn Setback Standards: ADUs often have specific setback requirements — how far they must be from property lines or other structures. These can vary by city and even neighborhood. Check these details to avoid costly redesigns or permit rejections.
- Evaluate Access Point Rules: Does your property need a separate driveway or pathway for the ADU? Some cities have strict guidelines about accessibility, and knowing these upfront can save you headaches later.
- Investigate Parking Regulations: Many municipalities require additional parking spaces for ADUs unless exemptions apply, like proximity to public transit. Double-check whether these rules affect your plans.
- Consult Local Experts: If you’re overwhelmed by the fine print, connect with a local architect, contractor, or real estate attorney who specializes in ADUs. They can help interpret regulations and even suggest creative solutions.
- Keep Tabs on Policy Updates: Laws around ADUs are evolving rapidly in response to housing shortages. Subscribe to newsletters from your city’s planning department or join local real estate forums to stay informed about changes that could open up new opportunities — or catch you off guard.
#2: Buying the Wrong Lot or Property Type
Not every lot is ADU-friendly, so it pays to be selective. Start by targeting properties that have at least 5,000 square feet — this gives you enough room to build without feeling cramped.
Ideally, the main house should sit closer to the front of the lot, leaving more usable space in the back for your ADU project.
Here’s where it gets interesting: corner lots and those with alley access are absolute gems.
Why? Corner lots often give you more design flexibility and room for parking, while alley access makes it easier to create a private entrance for the ADU — something renters love.
“If you don’t have that, create an easement or some sort of access point,” Thach said.
Meaning, if a property doesn’t already have a convenient way to access the area where an ADU would go — like an alley, driveway, or direct entry — you might need to establish one.
An easement is a legal agreement that allows someone to use a portion of a property for a specific purpose. For example, you might negotiate with a neighboring property owner to allow access through their land, or dedicate a section of your own property to serve as a shared driveway.
Alternatively, creating a new access point could involve building a private driveway, redesigning an existing layout, or even working with local authorities to establish a new entry route, like from a public alleyway.
The idea is to ensure there’s a practical and legal way to reach the ADU without disrupting the flow or usability of the main property. This is especially critical for parking, privacy, and meeting local permitting requirements.
Finding the Right ADU Property with Public Records Data and Maps
Finding the perfect property for an ADU doesn’t have to be a shot in the dark. It starts with knowing what to look for and using the right tools.
“You can begin by scanning neighborhoods on Google Maps to spot properties with alley access, corner lots, or other key features,” Thach said.
While this gives you a visual head start, deeper insights come from data-driven tools.
To get the most from your search, keep these tips in mind:
-
Check Zoning Codes: Make sure the lot meets local ADU requirements.
-
Measure Setbacks: Confirm there’s enough space between buildings and property lines to avoid permit issues.
-
Consider Privacy: Look for lots where the ADU can be separated from the main house, which boosts appeal.
-
Evaluate Parking: Extra parking on or near the property adds value.
That’s where PropertyRadar makes a difference.
“All I do is pull data on homes over 1,000 square feet, older, with plenty of equity, on 5,000+ square foot lots with alley access,” Thach explained. “Suddenly, you have a clear, targeted list ready to go.”
How PropertyRadar Helps You Stand Out in Finding The Right ADU Deals
Instead of manually hunting for information, you can use PropertyRadar's advanced filters to zero in on properties that check all the right boxes.
Want homes with large lots, plenty of equity, and alley access? PropertyRadar lets you pull up a targeted list in minutes.
- Smart, data-driven property searches: You can search for properties using detailed criteria that really matter for ADUs, lot splits, or redevelopment. Instead of just basic info like price or size, you can filter by things like zoning rules, minimum lot size, how long the owner has had the property, and how much equity they might have.
- Helpful setback info to save you time: Setbacks are the rules about how far buildings need to be from property lines — a big deal for building ADUs. PropertyRadar helps you quickly spot properties likely to meet these rules, like lots over 5,000 square feet with the right orientation, so you don’t waste time chasing deals that won’t work.
- Easy map measurements built right in: With PropertyRadar’s map tool, you can measure distances on the property itself, like how far the house is from the lot edge or where you might build an ADU. This makes it simple to check if setbacks and other rules fit without needing to switch to other apps or guess.
- All-in-one workflow for investors: What really sets us apart is how everything works together. You create your targeted list, then instantly pull up maps and measurement tools to check feasibility — all in one place. No jumping between platforms or messy data exports. This saves time and keeps your process smooth.
- Focused on ADU and zoning opportunities: This tool is designed to help you find the best ADU deals, with filters for zoning, corner or alley access (which can be a huge advantage), and setback checks. Plus, you can start marketing directly to sellers with properties ready for ADU or lot splits — giving you a competitive edge.
#3: Underestimating Construction & Holding Costs — Watch the 1% Rule
You might think you’ve got your numbers down, but if you’re not accounting for real construction expenses and the brutal timelines for permits, building, and occupancy, you’re setting yourself up for a financial faceplant.
Markets like Seattle and California are ahead of the curve when it comes to ADU potential, but they won’t stay under the radar forever. These areas are rewriting the rules of real estate, and those who move quickly are positioned to win big.
Here’s a prime example: In Seattle, building a 1,000-square-foot ADU comes with an upfront cost of about $350 per square foot.
That’s a $350,000 investment — not exactly pocket change.
But let’s talk about what that investment can do for you. That same ADU can generate $3,500 to $4,000 in monthly rent.
Think about that for a second: you’re hitting the coveted 1% rule, where your monthly income equals 1% of your total investment.
In today’s real estate market, with skyrocketing prices and squeezed margins, that kind of cash flow is practically unheard of.
Why does this matter? Because it’s not just about breaking even — it’s about creating a reliable, high-yield income stream.
The math speaks for itself: at $3,500 per month, you’re looking at $42,000 annually. Even if you account for maintenance, property management, and other expenses, you’re still left with substantial positive cash flow.
Thach calls it “the new cash flow game,” and for good reason.
ADUs like these offer a path to sustainable income that doesn’t rely solely on appreciation or risky market timing. They’re a hedge against economic uncertainty and a way to build wealth through predictable, recurring revenue.
The upfront cost might feel steep, but the long-term payoff can transform your portfolio. With rents this high and demand for affordable housing skyrocketing, ADUs aren’t just an opportunity — they’re a strategy.
Managing Construction Risks and Smart Investing
That said, construction isn’t cheap, and it rarely goes as smoothly as you hope. You’ve got materials, labor, permits, inspections, and, of course, the unpredictable delays from Mother Nature or city bureaucracy.
A setback here, a cost overrun there, and suddenly you’re bleeding cash.
The key? Build in a cushion — not just for your budget but for your sanity. Know what you’re signing up for.
And don’t fall into the overleveraging trap.
“The difference between me and everybody else doing BRRR is that other people pull out their down payment and as much equity as they can… I just want my original down payment money back out, and then I recycle,” Thach said.
Translation? When other investors use the Buy, Rehab, Rent, Refinance method, they often try to pull out as much cash as possible, including their down payment and any extra equity in the property.
Thach takes a different approach: he focuses on just getting back his original down payment. Once he has that money back, he puts it right into the next deal. This way, he keeps his risk low and his cash flowing steadily.
So how can you avoid the money pit? Well…
How to Avoid the Money Pit
- Get Real About Costs: Know your per-square-foot costs. If you’re in Seattle or California, think $350 per square foot for a decent ADU. Do the math and make sure the rents will justify the expense.
- Don’t Skip the Timeline Reality Check: Permitting and construction take time. Be conservative in your estimates and add padding for delays.
- Play It Safe With Leverage: Only pull your original down payment back out — don’t get greedy with equity. Overleveraging is a fast track to stress and sleepless nights.
You might think you’re being clever by stretching your budget or cutting corners, but in reality, you’re gambling with your financial future. The smartest investors know when to play it safe.
Thach’s approach? “I don’t pull the equity because I want to leave the equity in there. I make money over here [from active income]. That’s what I teach all my students.”
It’s not about rushing into deals or squeezing every dime out of a property — it’s about sustainability and smart strategy.
When building an ADU, you have to respect the process. Know your numbers, stay patient, and keep your focus on the long-term prize.
Otherwise, you’re just setting yourself up to fail.
So, are you ready to build wisely — or are you just another dreamer ignoring the price of reality?
#4: Ignoring Creative Opportunity for Forced Appreciation
If you’re ignoring creative ways to force appreciation — like adding extra units or transforming unused space — you’re leaving serious money on the table.
Too many investors play it safe, sticking to “turnkey” properties or simply hoping their house will “go up in value.”
But hoping isn’t a strategy. Cities are getting denser, zoning rules are shifting, and if you’re not taking advantage of that, you’re missing out on huge opportunities.
Easy doesn’t build wealth. Creative strategies do.
“With ADUs, you can buy a house and instead of just one unit in the back, you can put multiple,” Thach said. “By the time you’re done, you could have three or four total on one lot.”
So, what’s forced appreciation? It means creating new value out of thin air — turning unfinished basements into livable spaces, converting garages into rentals, or turning big lots into ADU villages.
This kind of value-boosting goes way beyond just waiting for the market to rise — it’s about building wealth on your terms.
If you’re not looking at properties and thinking, “How can I get the most out of this?” you’re missing the point.
Look for properties with unfinished basements, garages, or lots that can support multiple units. The goal isn’t just adding one unit — it’s about creating as many income-producing doors as possible on a single property.
What’s more? High-density cities and upcoming zoning changes are your best opportunities. Buy now and hold for when lot splits or ADU sales become the norm.
High-density housing is a trend that’s here to stay. Cities need more homes, and ADUs offer a smart, future-proof solution. Ignoring this shift means missing out on a major wealth-building opportunity.
Forced appreciation isn’t just about making more money — it’s about building a stronger, more resilient portfolio.
So, are you ready to stop playing small and start building something that multiplies your income and impact? Get creative. Get unhinged. Don’t let these opportunities pass you by.
#5: Poor Targeting and Acquisition Tactics
Poor targeting means going after the wrong sellers or properties that don’t fit your goals. Lazy acquisition tactics include relying on generic marketing or hoping deals just come to you.
This is why most investors never level up.
You need to think bigger by looking beyond the obvious properties, smarter by using data and insights, and way more strategic by focusing on motivated sellers with real equity and readiness to sell.
Thach’s strategy? Look for sellers who’ve owned their home for over 30 years, either fully paid off or with at least 50% equity. It works for both people living in the home and investors.
Think about it: someone who’s owned their home for decades likely has equity, emotional detachment, and a readiness to cash out.
That’s where you come in.
The Smart Way to Target
Finding the right properties starts with targeting the right owners — those who offer real potential for profitable investments.
So…
- Build Precise Lists: The key to successful investing is knowing exactly who to reach out to. Tools like PropertyRadar let you filter for long-time owners — people who have owned their homes for 30 years or more — as well as properties with at least 50% equity and lots that fit your ADU or lot-split goals.
- Look Beyond Appearances: A property doesn’t have to be rundown to be a good deal. Many well-maintained homes belong to owners who are ready to sell, especially if they’ve lived there for decades and built up equity. Expanding your search beyond just distressed properties uncovers more potential leads.
- Combine Data and Strategy: Use public records and neighborhood information from PropertyRadar to identify areas where ADUs or lot splits are allowed or becoming more common. This helps you find properties with real potential for adding value by creating additional units. Data gives you the facts, and smart strategy helps you spot opportunities to grow your investments.
Multi-Channel Marketing Tactics That Work
Waiting for deals to fall into your lap isn’t a strategy. You’ve got to go after them.
Thach’s hierarchy of outreach is simple and effective.
Door Knocking
Door knocking first builds immediate personal trust and opens direct conversations, making your outreach more genuine and effective from the start.
This approach takes courage, no doubt about it, but the payoff can be substantial.
By knocking on someone’s door, you’re putting a face to your name, which can create a level of trust and connection that’s difficult to achieve through other methods.
For homeowners, especially those who’ve owned their property for decades, this personal touch often makes them more willing to listen and engage.
While it’s true that door knocking is slower than calling or texting, it’s an incredibly effective strategy for targeting high-equity properties or long-time owners. These individuals are more likely to appreciate a genuine, face-to-face interaction that respects their time and investment.
The key to success lies in your preparation. Know exactly what you’re going to say — your introduction, your reason for reaching out, and how you plan to follow up.
For example, “Hi, I’m [Your Name], a local investor, and I specialize in helping homeowners sell quickly and hassle-free. I’d love to discuss how I can make you a fair offer and follow up with more details soon.”
Bring along a professional business card or a simple, well-designed flyer that clearly outlines your offer.
Most importantly, approach the conversation with a friendly but focused demeanor. Keep it casual enough to feel approachable but purposeful enough to make an impact.
When done right, a knock at the door could be the start of your next great deal.
Cold Calling & Text Messaging
Next up, we have some basic blocking and tackling that, when done right, is undefeated: cold calling and text messaging.
Cold calling often gets a bad rap, but don’t let that fool you - that's when it's done poorly. Done correctly, it’s one of the most effective ways to engage with your leads directly.
When you’re on the line, you have the unique chance to hold a real, two-way conversation.
This is where cold calling shines: you can explain your offer in detail, address concerns, and handle objections in real-time. It’s personal, immediate, and builds trust in a way that no impersonal outreach method can match.
With the right call script and a targeted list, you can zero in on high-value leads and filter out the uninterested quickly.
Thach Nguyen sums it up best: cold calling offers the “highest and best return” for your time.
But sometimes people don’t pick up. That’s where text messaging comes in.
Who doesn’t check their texts these days? It’s one of the fastest and most direct ways to grab someone’s attention.
A simple message like, “Hi [Name], I noticed you’ve owned [Property Address] for over [X years]. Any interest in selling?” is low-pressure, personalized, and easy to respond to. It keeps the door open without making the property owner feel cornered.
Texts are also perfect for follow-ups: if they didn’t answer your call or were hesitant to talk, a quick message can keep the conversation alive without being pushy.
The key to success with both methods is authenticity. Whether it’s over the phone or in a text, take the time to personalize your approach. Use their name, reference their property, and details about their property that aren't readily apparent to show that you’ve done your homework.
A genuine, thoughtful touch is what turns cold outreach into warm leads — and eventually, into deals.
Direct Mail
After calling and texting, reinforce your outreach with direct mail.
Think about it: a well-crafted postcard or letter grabs attention the moment it’s held. It’s tangible, direct, and can spark curiosity in a way few other methods can.
Start by focusing on neighborhoods or property owners who could benefit from selling their property.
Keep your message straightforward and focused on their situation — something like, “Thinking about selling your property? I specialize in helping owners like you unlock value,” or “Ready to move on from [Property Address]? Let’s discuss a fair cash offer.”
Include a clear call-to-action, such as a phone number or website, to make it simple for them to reach out.
Whether they’re planning to sell soon or just want to maximize their home’s resale value, your message should show them how you can help make that happen.
Consistency is key. Sending a series of personalized mailers over time builds familiarity and trust. Pair this with email follow-ups, and you’ll create a one-two punch that keeps your message top of mind.
Email is the ultimate follow-up tool to tie everything together. It’s low-cost, reliable, and allows you to stay top of mind with your audience.
After reaching out through door knocking, calls, texts, and direct mail, email serves as a subtle yet effective reminder of your value.
Why? Because it lets you really get into the details that matter to sellers.
You can also share helpful market info, like recent sales nearby or rising home values, to show why your offer makes sense.
And don’t forget to include a few success stories from homeowners you’ve worked with — it’s a great way to build trust and show you’re the real deal.
So here’s the question: Are you willing to get creative and target the right properties, or are you content standing in line with the rest of the herd?
Thach’s approach is crystal clear — “If you know what to buy, where to buy, and who to target, you’re already ahead of 90% of investors out there.”
The choice is yours: play it safe and hope for the best, or step up and build a strategy that works.
PropertyRadar makes it easy to take that leap. With advanced tools to filter properties, uncover hidden opportunities, and connect with the right owners, you’ll have everything you need to outpace the competition.
Start building your smarter, more targeted investment strategy today with PropertyRadar.
Ready to unlock the power of public records data and 150 million properties? Get a free PropertyRadar trial and find your next opportunity today.
