How Residential Investors are Generating Massive Cash Flow with This New Trend in San Diego

Today our guest is Kevin Trinh, the owner of ADU Mastermind. He is a licensed builder with over two decades of construction experience. He believes you can use ADUs to create lasting wealth and multigenerational stability.

ADUs are a huge trend in San Diego, as California was the first state to legalize them. Following that, many states like Washington, Seattle, and Florida are now seeing a surge in the demand and construction of ADUs.

How Did You Get Into Real Estate?

I was a premed student, but as you can see, the medical profession wasn’t for me. Things took a different turn when I dropped out of college. I started working in construction to make some side money, and when the business started to take off, there didn’t seem to be a reason to go back to medical school.

Later, I went back to college to earn an MBA and decided to go all in on the construction business.

The last six years have been pretty interesting. I started investing in real estate and got heavily involved in ADU construction. These days, I mostly focus on personal projects to build a rental property portfolio.

What Makes ADUs a Compelling Investment Opportunity in Today’s Market?

California is a pricey state. In cities like San Francisco and San Diego, buying a home can feel out of reach. As families grow, many people are finding it more affordable to stay in their current homes rather than selling and upgrading to something bigger.

An ADU offers private space that can be used for kids, in-laws, or elderly parents. It’s a smart way to make the most of the extra space on your lot.

ADUs are attractive to investors because, in today’s market, it’s hard to find properties where you can still create value. Generating passive income with positive cash flow is becoming more difficult. Large-scale investors are buying high-cash-flow properties in the Midwest, but that’s rarely an option in places like San Diego.

Buying cash-flow properties on the East Coast and West Coast is tough. Florida, San Diego, and Seattle are all expensive markets. While you might see strong equity growth due to how dense these areas are, cash flow is often minimal. You might even lose money if you rely on the traditional BRRR method.

ADUs Add Value to the Property without Flipping It

In simple words, if you build an ADU, you can add value, boost the equity, and create cash flow. That’s what we are doing with one of our current projects.

We bought a property for $1.05 million, which was on the pricier end, but it came with shovel-ready plans. We didn’t have to hold the property for 6–8 months and go through the entitlement process. The construction process could begin almost instantly. I am adding 6 units to this single-family house, and it will be a seven-multiplex.

Once the construction is complete, we will have $1.5 million in equity, as constructing these 6 units will cost us $1.2 million. The beauty of building accessory dwelling units is that you can expect massive cash flow with immediate return. The net cash flow on these 6 units will be $10K per month.

Detached, Attached, or Garage Conversion

There is a lot you can do with a single-family home, depending on the property structure and lot size. Always think about maximizing the potential of that single lot.

If you’re thinking about equity, a detached unit will provide better value, but for cash flow, any ADU is fine.

Why Is San Diego One of the Most Popular Markets?

San Diego is a beautiful city and everyone wants to come here. After Covid, a lot of people moved here from San Francisco to live more affordably while working remotely. (San Francisco is super expensive.)

That’s why density is growing and we are running out of space to build on because of San Diego’s tricky location. Below is Mexico; the west side has the ocean, the east side has mountains, and the north is pretty much OCLA (Orange County and Los Angeles).

The population size is expanding and there is not enough housing inventory to accommodate those people. Prices have gone up by 15% to 20% in the last couple of years. That’s why the best way to create more space in a house is through ADU construction while utilizing the same lot.

Investment Strategies for Beginners Starting with Limited Cash

The San Diego market can be competitive and expensive. Try your hand at a fix-and-flip property through an FHA loan. Explore house hacking. Get real-life experience renovating a single-family house before approaching ADUs.

Building ADUs can be complicated because you have to construct something from the ground up.

Raising Capital for Investment Projects

Real estate investing is all about relationships. When you're just starting out, raising capital can be challenging, especially if no one knows who you are. Attending capital-raising events might not be enough on their own.

Much of your success will depend on the market and how much risk investors are willing to take. Focus on building connections with experienced investors who can help you shape and present your deal. Once they understand your vision, there’s a good chance you’ll find someone willing to back it.

What If You Were Starting Over with Only $10K in San Diego?

$10,000 in San Francisco can’t get you a lot. Sub-2 and creative deals are possible, but let’s not approach that as your first deal.

I would join a mastermind program with that $10,000. Your learning experience with the mastermind group will change the trajectory of your career. Your connections will deliver a 10x return on investment. Once you learn and have built connections, you will find investors who will help fund your projects.

A Quote or Piece of Advice that Had the Biggest Impact on You

It’s something I’ve read and lived through. Failure is a part of both entrepreneurship and life. You have to expect it, or you’re living in la-la land. The truth is, successful people have failed far more than most of us can imagine. That’s how you grow. You learn, adapt, and get better. There’s no shortcut. You just go back to the drawing board and try again. Failure is the push you need to take the next step.

Every failure brings with it the seed of an equivalent success—Napoleon Hill.

You can connect with Kevin via Instagram @thekevintrinh.