The One Thing That Made That ADU Guy a LEGEND!

You're fixing an affordability problem, you're doing something that you're passionate about, and then you're sharing the knowledge online. I think more investors need to be doing exactly what you're doing. This is from someone who does have a paid mentorship program. Hello and welcome back to the channel. I'm Christian, joined again by Derek, That ADU Guy. Follow him on Instagram, follow him on YouTube. He is the man. For accessory dwelling units. He's been doing this for 30 years. If you haven't caught the last episode, we talked a lot about what he's done and how he got started. On today's episode, we're talking about the thing that makes him as good as he is at what he does, how you can be successful, and really some of the differences between the successful and unsuccessful in this space. This is going to directly apply to your business. Pay attention to all the tips, and let's get started. So Derek, welcome back to the channel. Thank you for joining me again.

Glad to be here. Let's help some people.

Let's just start with the, the main question. Let's just dive right in, everyone. Uh, the hook, the lead, the value— we're going to drop it right here in the first minute. What thing in this whole real estate space do you think you, Derek, what is your superpower? What are you the best at in this space?

Yeah, I wish I had a better answer. I mean, it's, it's just a boring, slow, steady thing, and I'm gonna I'm going to sugarcoat it. If I was being completely honest, I would say obsession in one word, but I'm going to, I'm going to lighten it up a little bit and just say focus. And when I say focus, there's a lot of facets of focus. That's why I lead with the obsessive part is because you have to want this so bad no matter what your strategy is. If you're trying to build strip malls or you want to build manufactured home parks or you're going to do tiny house communities with a central dome studio, it doesn't matter. You have to be so focused and so obsessed with not failing that you have no choice but to win. And there's a story that I heard. It was a Warren Buffett meeting. The day that he met Bill Gates, they were riding around on a boat and they were playing cards and they asked each other separately to write down what their most important facet of their business was and what made them successful. And they both wrote down the word focus. And they ended up meeting— that initial meeting, they spent like 8 hours talking and became really good friends and started a foundation partnership together and so on and so forth. But not to compare myself with those great business minds, I just think it's the simplicity. Like, if you want to get really good at something, then focus on that and put your blinders on to everything else.

Well, that's the thing. Everyone that you see online, even if you're watching Derek's channel, you're watching our channel, you're watching Bill Gates, Alex Hormozi, Anyone you've seen who's hyper-successful is usually really, really, really good at the one thing that they're good at. And oftentimes there's some deficiency somewhere else. It's not like they're just this amazing person. It's that they're super focused on the one thing they do and they've become inhumanly good at that one thing. You focused on your strategy. You've been doing this for 30+ years. Of course, you're better than everyone else at this because you've been doing it longer with more focus. This is going to be true for anyone. If you want to be the best in the world at anything, You're not going to be the best in the world at everything. You're going to hyperfocus on one thing. And that's, to me, I think that's the key to success for almost all entrepreneurs. You have some amount of hyperfocus and obsession in your business. So you don't need permission to be obsessed, by the way. But if, uh, if you're listening to this and you're like, wow, you're allowed to be just like absolutely obsessed, uh, yes, you have, you have our stamp of approval. You have permission to be obsessed with the thing that you want to do. You will in fact die. And so spend the time that you have doing the things that you want to do. If you want to be the best in the world at something, that is— I love that advice. What has that looked like for you over the last 30 years? Being obsessed, how has that contributed to your development from your first project? I don't even know how many projects you've done. A ton, like a lot, lot of projects. How has that obsession manifested in your business?

Well, it started with just one single idea to build this accessory dwelling unit for, for a teacher of ours when I was in high school. I've always been good with my hands. I was always working construction jobs from a very, very young age. I mean, I literally had a full-time job in the summer from 10 on. And the first time I built one of these units, I remember thinking that this feels like building a fort, it's just fancier. So, I was the kid that was always outside throwing dirt clods and riding around town on my bike with no helmet and no shirt. And there's just nothing more freeing as a kid than like running around in the summer and building a fort. That was in my blood. So, the first time we built a real unit, it was just the fort on steroids. So, it was a passion, it was an art. I also grew up in a situation that I wouldn't call completely housing insecure, But we were tenants. I had a single mom. I grew up in a situation where I didn't have the kind of housing that I thought I deserved. And as soon as I realized that I could solve that, potentially solve that problem for myself and for others, like literally with my hands and my mind, that was the catapult. It really was the catapult that I had to be able to have that focus and have that obsession is because deep down inside of me, like there was a purpose. I really did have a purpose. From a young age. So that's, that's kind of how I would wrap that question up. As it, as it started to progress, you know, I got bored doing this 25 years ago, and that's when I knew I was really good at it. Like, I, as opposed to getting shiny object syndrome when something started to become mundane, that's when I doubled down. Like, when I, when it got boring was when I was like, okay, I'm on to something, and let's just continue to improve it. And I hope to touch on it, you know, as we go through the story here, but I'm still learning today. You know, I've participated in hundreds of builds. I've, I've fine-tuned one simple design that I build over and over, and every time we build it, I still make a mistake or two. So we're still evolving and still learning. And I don't say that I'm the national leader in accessory dwelling units. I just say that based on luck in a city that I was living in that allowed these legally at the time, I've just been doing it long enough to make more mistakes than anybody else I've ever met. And that gives me the experience. So, it's not like I'm way above anybody else. I've just been making more mistakes for longer than anybody I've known.

[Speaker] I think you touched on two huge things there. One, we have something called the stupid tax. When you're new, everything's more expensive 'cause there's things you don't know you don't know. You've paid more stupid tax over your career than anyone else in your space. You've made the mistakes. So, now, your efficiencies are just higher than everyone else's 'cause you've already paid into the program. You understand more mistakes. And while we still make 'em, it gets cheaper and the math gets better and the budgeting, like anything that you get a mastery of, it costs more upfront. So if you guys are doing your first projects, you're like, "Wow, I'm not having the same success as Derek." Yeah, you're not going to. You're gonna have to do this a few times. Repetition is huge. Something I should have done this before Cody and I got started. We did the shiny object syndrome. And for those watching this channel, by the way, you could watch the branding of Shiny Object Syndrome. It's, we chose the adventure, we're going to go do something amazing. We did all the things and it was really hard. And if I could go back in time, I would have focused on only two things: buying and stabilizing entry-level multifamily housing where we're the best at in our county, stabilize entry-level housing and then share how to do it online. I love talking. I love sharing the adventure. I'm a talker. That's like the two things I would have done. All the other adventures that you see, all the different companies and the stuff, we would be farther if we did the Derek model. When it comes to money and finances, boring is king. You want stability. You want repetition. It's exactly like you said, uh, you want to make those mistakes in one area instead of making mistakes everywhere. You want to learn and get better and better and better and fine-tune something that you know that works. When you complicated and all over the place, you just end up with a mess and a bunch of problems that end up being really expensive. You can survive that, but this is the secret sauce. Find the thing that you're the best in the world at or could be the best in the world at, and then do that thing and get better at that thing. So that's awesome. Tell me about this one design. So you have one particular design that you like. Is it your favorite design? Is it just the one that's worked best? Tell us about that.

Yeah. So this, this design is not going to win any awards. It's not going to be on the COVID of any architectural design magazine. What we like about this one unit as an accessory dwelling unit, it's a 1-bedroom, 1-bath design and it has a lofted space above the bedroom bathroom and it has 16-foot-tall vaulted ceilings, is its affordability and its repeatability. And the fact that every tenant that's ever walked into it wants to rent it and loves it and doesn't want to leave. So what we've designed over— it's, it's, it hasn't taken 30 years to come up with this design. We've been building it for a long time and we just keep fine-tuning it is the ability to produce this at an affordable price so we can keep our rents low enough that people can be just under market rate and we can have the highest possible yield. And we start with a simple design. And we use the same products over and over. We keep all of our plumbing on one wall. We do a one-wall galley kitchen. We get free storage space. We do the loft. So it's a small unit. It's only 524 square feet, but it feels twice as big because there's volume. It's got a cool covered front porch. We use hard surfaces that don't need maintenance, raised seam metal roofing that's going to last forever. So one of the things that that we do when we're designing these units is, is we keep them like this. I've never sold a house. We want to make sure that it's easy to own this real estate. And one thing you and Cody talk about often is like, keep it simple. We don't want all these extra terms in our contract because that dilutes the simplicity. We don't want some big system. It's simple, right? So I'm thinking, how do we build this simply and affordably? And then how do we make it simple to maintain? So if you don't have a deck, you're not going to have to go sand it and stain it every 5 years. Concrete patio, it might crack, it might fade, but it's not going to need any maintenance. If we use LVP because it's affordable, but it's only going to last 10 years, is it really a savings compared to a real hardwood floor that we put down that even if somebody pours a bucket of water on it every day, it's going to last 100 years? Like, we've seen those little things like that. So the design is nothing special. It's just simple. Affordable, and easy to maintain.

It's exactly what everyone needs to hear. Simplicity. If it is simple, it's repeatable. If it's repeatable, it's scalable. If you're trying to build a business, scalability is everything. I see a lot of people start businesses where I'm like, it's a cool idea, but you're limited somewhere. You have in this design and in your business in general, you have something that you can do again and again and again, continue to get better. You have less unknowns every time you do it. And like you said, like the maintenance is not that hard. You're thinking of what things are going to last the longest. Metal roofs, for example, I love those. But you have sustainable things that are simple to set up, simple to maintain, which means you have a business that can scale more or less infinitely. Like you can make this business the size that you need to make it because you kept it simple. Whenever I hear a trendy thing online, the next, you know, the newest form of financing, the best lending strategy, technology, it's almost always a gimmick and there's always a downside. Tried and true simple things are always the best businesses. I've never seen an exception to that outside of maybe the tech sector. You might have a new technology that, you know, makes you a bajillionaire. But if you play the real estate game, there is nothing new in real estate for the most part. Laws will tweak a little bit, but the rules of the game are simple. Simple strategies, uh, least creativity possible. Uh, you don't want to get like way like into imagination land. Even in creative finance, it's called creative. If my clause, whatever made it creative, was super simple, it's going to be repeatable and we can use it again and again and again and scale. If you have to spend 10 minutes explaining your creative clause, it's a stupid idea. Just do something simpler. So no, I, I love the— I love everything about it. Is that design We've talked before this. Is that a design that you share, or is that, is that your, your super secret sauce?

Well, you know, I've got 2 free plan sets on my website, that aduguys.com, under the resources tab. We give away 2 separate plan sets on our resources tab of our website. And this one, we have the larger version. So we have a 524 square foot and then like a 660 square foot version. So we give away the larger version, the smaller one. The only reason we haven't given it away is because I haven't completely got it to exactly where I want it. But it's, it's the same exact layout as the larger unit that you can see. We've got a 2-bedroom, 2-bath unit on there, a PDF. You can download it for free right now. And then the 1-bedroom, 1-bath with the loft is this basic design that I'm speaking of. And we, we, we want to open source it all.

Yeah, that's something that I really appreciate. You're coming in and offering low-income housing, which I'm very, very, very passionate about. There needs to be people doing that. You said the magic words. You're building something in a way where you can charge just under market rent. And these are not huge units. So you're fixing an affordability problem. You're doing something that you're passionate about, and then you're sharing the knowledge online. I think more investors need to be doing exactly what you're doing. It's not— this is from someone who does have a paid mentorship program. That's, that's, you know, that's my actual time. Those are expensive. It's important that people are sharing things like this on YouTube for free. Let's get the knowledge out there. Let's have the channel, the website designs. If people need help, I think it's the best thing that you can do as an investor is if you have some success, just give back to the other people who are trying to have that same success. A lot of people get stuck, so Um, if you are interested in this strategy, reach out to Derek, download this design, see if this is something that's going to be right for you, or if a different business is what you're excited about. The takeaway from today, you will win this if you do what you're passionate about and you keep it simple. If you can do those two things, um, I think you'll be amazed how, how lucky you consistently are. Uh, the luck kind of makes itself when you're consistent and obsessed. So yeah, you have my permission to be obsessed, Derek. Does, does everyone have your permission to be obsessed?

Go be obsessed. The more obsessed you are, the quicker you're going to reach your goals.

There we go. That is a wrap. Apply that. If you haven't yet, please like and subscribe. We want to share more of these stories with all of you. We only get to do that if you guys share our stuff. So give us a share. Let's get it out there, and we'll see you on the next episode.