•
One of the best outcomes in real estate is when the strategy fits the people doing it. Not just on paper, but in real life.
That’s what stands out about Kenneth Chu and his wife. They started with their own home, did a major remodel, converted a garage into an Accessory Dwelling Unit (ADU), and realized they genuinely enjoyed the work. Not the “real estate hype” side. The real work: managing a project, picking finishes, solving problems, and watching a tired space come back to life.
That first project became their blueprint. Now they’re working on two buy-and-hold rentals in the San Francisco Bay Area, each with a garage conversion ADU in the plan. And they’re doing it while Kenneth still works a full-time job and keeps real estate as a part-time focus.
In an episode of the DealMachine Real Estate Investing Podcast, Kenneth shares how he and his wife turned a home remodel into a buy-and-hold ADU strategy in the Bay Area. Want to hear the full interview? Watch the full episode below:
How Did They Use ADUs to Build Wealth?
They bought off-market fixer homes with garages, used hard money to renovate quickly, converted the garages into ADUs, and planned to hold the properties as rentals.
The ADU creates a second rental unit on the same lot, which increases cash flow and can boost the property value after renovations.
The Spark Came From Remodeling Their Own Home
Before they bought investment properties, they learned the game on their primary residence.
They expanded the back of the home by about 700 square feet and added two bedrooms and two bathrooms. Then they converted the garage into an accessory dwelling unit.
They enjoyed the process because it gave them a clear view of what the work actually looks like day to day:
- Managing a construction project from start to finish
- Seeing the before-and-after transformation
- Working on decisions together as a team
If you’re planning to hold rentals long-term, you want a strategy you can stick with through permitting, surprises, delays, and the normal friction that comes with older homes.
Their first remodel didn’t just add value. It built confidence.
Buy-and-Hold Plan for Two Fixers and Two ADUs
Kenneth is in the San Francisco Bay Area, joined a training community in late 2022, and is currently working on two projects:
- A single-family home in Hayward purchased for $500,000.
- A single-family home in San Lorenzo purchased for $450,000.
They're both fixer-uppers and have garages being converted into ADUs. Also, they are intended to be held as rentals after the renovations are complete.
The plan is straightforward:
- Buy a property that needs work
- Renovate the main house fully
- Convert the garage into an ADU
- Rent out both units
- Hold long-term for cash flow and equity growth
That two rents for one address structure is the core of their approach.
Why Off-Market Deals Worked in the Bay Area
In high-demand markets, the biggest challenge is often not how to renovate. It’s how to buy at a price where the math still works.
They focused on off-market deals, but with a twist. These properties were represented by an agent, but they never hit the MLS.
A seller passed away, and the property was inherited by a relative. The family initially intended to fix it up and list it, but it became too much work. Kenneth stayed in communication with the agent and followed up when asked. Eventually, the family decided to sell the property off-market as-is.
Sellers do not always decide on day one. They decide when the burden becomes real. Off-market opportunities tend to come from relationships, timing, and polite persistence.
The One Extra Question That Turned One Deal Into Two
After they got the first property under contract, Kenneth discovered the same owner had another property nearby. So he asked the agent a simple question:
Would the family consider selling the other one too?
That turned one deal into two without doubling the marketing effort. It’s worth paying attention to this because it’s not a flashy tactic. It’s just being thoughtful and thorough.
If you’re already in a conversation with a seller or an agent, asking about additional properties can be one of the highest-leverage questions you can ask.
Why Hard Money Fits the Timeline
They used a hard money loan to buy and renovate. While they didn’t start out planning to use hard money, they learned about it through networking and education. They originally assumed conventional financing was the only path.
Hard money worked here because the timeline mattered and the projects were heavy rehabs:
- These were fixer-uppers that needed full renovations
- The loans can close faster than many conventional options
- The financing can support heavy rehab that traditional lenders may not at the start
Their term was six months, and their renovation goal was three to four months per project. That gap matters. If you use short-term financing, the schedule becomes part of your risk management.
The structure is simple. Use short-term funding to acquire and renovate, finish the work inside the loan window, then transition to longer-term financing once the property is stabilized.
The Renovation Scope and the Garage ADU Conversion
For the Hayward property, Kenneth estimated the total cost at about $750,000, including purchase price and rehab.
The rehab scope was broad:
- New flooring
- Kitchen remodel
- Whole-house updates
- Garage conversion to create the ADU
They estimated the value after renovation could be about $900,000, possibly higher, largely because of the added ADU value and the overall renovation.
Garage Conversion ADUs Keep the Strategy Simple
They’re keeping the lot intact without splitting it. Each lot is about 5,000 square feet, and they described the yard as tight but workable. The plan is to keep the property simple with basic landscaping, a clean layout, and minimal complexity.
Garage conversions can be attractive because the core structure already exists. In many cases, you’re working with an existing footprint and roofline, and the conversion can be more controlled than starting from scratch. You typically still need to address insulation, finishes, plumbing, and electrical upgrades, but you’re not building a new structure from zero.
How They Vetted Their Contractor
They chose their contractor through word-of-mouth from someone in their network. They also visited a prior project to confirm quality, then had the contractor walk the property and provide numbers.
Here’s a simple checklist that matches what they did:
- Get a referral from someone who has completed a project
- Walk a finished job to verify workmanship
- Walk your property together and confirm the scope
- Get clear bids and timelines in writing
- Confirm communication rhythm before the work begins
Find Deals With Driving for Dollars
Kenneth used driving for dollars to identify distressed homes. Then he used skip tracing to get contact info and call owners. He added under a thousand properties to his list.
Many people try this with 10 addresses, get discouraged, and assume it doesn’t work in their market. Most off-market success comes from volume and consistency. They also kept follow-up simple. No scripts. No pressure. Just check-ins.
If you’re using DealMachine for driving for dollars, this is where the workflow helps. Tag distressed properties, keep notes, track follow-up, and stay consistent long enough for timing to work in your favor.
Follow-Up and Mentorship Reduced Risk
The biggest challenge they called out was deal flow. Finding a distressed property where the price, scope, and timing actually line up is hard. That’s normal.
They also used a deal review style call to present the numbers, talk through ARV and repairs, and get feedback from a mentor. That feedback gave them the confidence to move forward.
When a seller wants an answer fast, clarity is a competitive advantage.
The Long-Term Play: Buy, Improve, Hold
They’re planning to hold both properties and rent them out. That’s where the ADU strategy becomes more than a one-time value-add. It becomes a long-term wealth builder.
Two income streams per property create more resilience if one unit is vacant temporarily. You also get the upside of long-term appreciation in supply-constrained markets, plus equity growth created by the renovation and the added unit.
Key Takeaways
If you’re exploring an ADU investing strategy, here’s what this story reinforces:
- Start close to home when you can. A personal remodel can teach you the basics fast.
- Off-market deals often come from timing. Follow-up beats pressure.
- Garage conversions can be a practical ADU path when the structure already exists.
- Hard money can work when the timeline is disciplined and the scope is clear.
- Networks reduce guesswork. Referrals and deal reviews can prevent expensive mistakes.
- Ask the extra question. One seller can have more than one property.
If this resonates, it’s worth exploring further. You don’t have to copy their exact plan. You can borrow the framework: build a repeatable process, surround yourself with helpful people, and focus on deals where the math works without needing heroics.
FAQ: ADU Investing and Garage Conversions in the Bay Area
What Is an ADU in Real Estate?
An ADU is an accessory dwelling unit, a smaller secondary housing unit on the same lot as a primary home. It can be attached, detached, or converted from an existing space, like a garage.
Is Converting a Garage Into an ADU Worth It?
It can be, especially in high-demand rental markets. A garage conversion ADU can add a second rent stream and may increase the property’s value after renovation.
How Do Investors Finance an ADU Conversion?
Common options include cash, renovation loans, home equity products, and hard money or private lending for heavy rehab projects. Many investors refinance into long-term financing after the property is renovated and rented.
What Is the Biggest Risk With Hard Money Loans?
Timeline and execution. If renovations take longer than planned, carrying costs rise quickly. Strong contractor management and a realistic schedule buffer matter.
How Do You Find Off-Market Properties for ADU Projects?
Driving for dollars, skip tracing, agent relationships, and consistent follow-up. Most deals come from volume and timing, not one perfect phone call.