Accessory Dwelling Unit: A New Way To Make Money With Kristi Cirtwill

Sometimes, having too much lot area can cost you money with maintenance alone, so instead of losing money, why not make some through that vacant area? An ADU (Accessory Dwelling Unit) can easily be one of the go-to options in these situations. Kristi Cirtwill, Hoarder Homes Specialist and the President of Cirtwill Investments Inc., joins Athena Paquette Cormier to talk about this new opportunity in the real estate space. Stay tuned to this episode to learn how you can take advantage of this niche and discover what you need to know if you decide to take this on as your entry to financial freedom.

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Accessory Dwelling Unit: A New Way To Make Money With Kristi Cirtwill

I have Kristi Cirtwill from Cirtwill Investments, who is going to talk about many things but was invited to come and talk to us about ADUs, and whether they’re worth the trouble, how to get an ADU going and what the processes are. Welcome, everyone. Kristi, why don’t we start by just introducing you, where you grew up? Did you always live in Los Angeles or did you move here, and how did you came to do what you do?

Thanks for having me. I appreciate it. I actually moved from Canada. I had good jobs, but just jobs I didn’t like doing. I was making $32,000 trying to climb the corporate ladder and it was something that wasn’t for me anymore. I wanted to do something in real estate. I’ve always had an interest and of course, I read Rich Dad, Poor Dad as a lot of people have and that got me thinking of other ways to create wealth for myself. I bought a couple of rental properties out there, but couldn’t figure out how to get ahead to the next level. I knew that the house flipping business was, at least I heard, it could be profitable in the States. I came down and started taking some real estate classes and ended up making a business out of it. I started buying my first houses around 2008, which the timing couldn’t have been better because that was just after the crash had happened in 2007. Been doing it ever since and then got into doing some of these ADUs, Accessory Dwelling Units. That’s why you have me to give more detail on that.

I believe you should learn from people who are doing it, not people who are up on a stage talking about how it’s possible. I love hearing people talk about their process and the real deal, we’ll call it. You moved here in 2007 and you were inspired by books, or did you watch a TV program? Why California? You grew up on the East Coast, why didn’t you flip in Florida or some other state? How did you come to pick California?

I closed my eyes and pointed on the map. It didn’t even have anything to do with the weather but in hindsight, I’m glad I ended up here. I was also considering Ohio because I’m from Toronto and it’s a short drive over the border. Winters would have been just like back home. There was a program way back in the day called New Belief and I took some courses. I thought, “I’m going to get a one-way ticket to LA.” I had one check bag and one carry on and that was it. Back then, Airbnb didn’t even exist, so I had found an apartment through Craigslist or some unreliable source.

It was a bit of hope and prayer in the beginning, but I came here with a desire. The first thing I did was I tried to find people who were actually doing it. You go to these real estate meetings, and eventually people say they’re doing this or that. I looked some of them up and I’m like, “Here’s a company that’s flipping houses so you can make a business out of it.” I knew it could be done. It was a matter of figuring out, “How can I do it? How do I get the knowledge? How do I get the money? How do I get started?”

Did you move here like with $1 million in your bank account, or how did you get started? How much seed money?

On my $30,000 job a year in Canada, I was able to buy my own house and rental property. To move down here I sold the rental property and I’ve made about $70,000. Mind you, that’s not in a few months’ time like you can make in California. That was over a several year period of growth in equity. I had a small investment to start, but I didn’t have any knowledge. I had common sense and that’s about it. A small investment to come down and I had to go through the immigration process and get my work permits. Obviously, to flip houses, you have to have some money in the bank, be in a place to fully leverage. I even do that now. When I buy my houses to flip, I can fully fund them. The purchase and the rehab. You still need to have a little bit of something in the bank for carrying costs and incidentals. That’s the reality of the business.

You didn’t come here with a job already lined up, a paycheck?

No. The work visa I’m on is for a business owner or an investor. I had to make it happen or I will be going back.

Which if that’s the worst that happens to you, I guess it’s not so bad. You give it a shot and if it doesn’t work and you go home. In between the time that you started flipping and now, how many houses would you say you’ve flipped over those years?

Since 2008, I bought about 200 houses. In 2013 I kept a bunch of those as rentals. I’ve since sold those, and now I’ve got a few that I’m going to keep as rentals. My purchases have been around that, and then of course, when you flip them, those are ones out the door. The total transactions may be closer to 350 to 400.

In flipping homes, I would assume you have to run crews, you don’t do the construction yourself. You don’t nail every nail and put in every window. How many crews do you think you have going at once on average?

In the beginning, I was giving a general contractor the chance to prove themselves on a job and so I went through a few trying to figure out who I could work with. I am not a one and done. I want relationships. Finally, I got to the point where I met a great general contractor. Between him, we’re running a crew of about 26 guys. He’s the guy in charge of figuring out where they go every day and he moves them around based on what skills they have and people we need on what job site.

You’re not managing the crews anymore. He basically took that over?

That’s right. At some point, as I get busier, I’ll bring any other general contractor but for now, this one guy can do it with the 26 guys.

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That’s a lot of people to manage. Give people an idea of how many rehabs or flips you have going on.

I’m somewhere between 12 to 15. I have at least a dozen and they’re all in various stages. Some I purchased so we’re starting construction. Some of these construction projects take a while because of ADUs or additions, and then we’re in the final stages where we’re staging them and getting them ready for sale. We’re all in different stages.

Are they all in different cities, or do you mainly focus on one city when you flip homes? How does that work for you?

I’m mostly in Los Angeles and Orange County. I also go to Ventura County, out east to San Bernardino, Riverside Counties, and then as far south to North San Diego County.

That’s pretty spread out. You don’t visit those homes every day? You’re not driving around?

No, I’ll go to see them the first time and get them into escrow. Probably, again, once I’ve purchased them to walk the job with the contractors and figure out what you do. There are some times in between, I need to run down there and check on anything, I do that. Generally, that part of it is fairly hands-off for me. The general contractors manage all that.

In general, where do you find your deals? Who brings you the homes to buy?

I do it 100% off referral. When I came to the US, the first thing I did was I joined a networking group. Real estate and real estate investing groups are super important, but that’s not what I’m talking about when I say a group. I join a business networking type of group, so other small business owners who may have CPAs, business attorneys, other small businesses that have the interest to help my business grow as I have the interest to help their business grow. The more people that know about what I do, the more referrals I get. I should say there was an exception where I got two deals off the MLS but those properties were on the MLS for about 90 days. They were sitting there a while. Generally, I don’t go after anything on the MLS that’s been on there a week because it’s too competitive.

Being a house flipper, you can’t afford to pay retail. You have to get a discount to have some buffer to make a profit. It has to have that potential profit.

My niche is buying hoarded houses. Have you seen that TV show Hoarders? Those are the houses that I buy. Let’s put it this way, I’m paying market value for the condition the home is in. That’s at a discount because that’s what the home is worth. They’re completely dilapidated in most cases.

Hoarder homes, there’s a lot of stuff in that home? Is the hoarder person still living there, or is it their family who takes over? Maybe they passed away?

I’m usually dealing with the family members. If that person has gone into an assisted living home, or they’ve passed away and I’m dealing with the heirs on the purchase of that property.

Why do you think you’re able to do hoarder homes?

I have compassion for these people. Whether it be the person with the hoarding disorder or with the family members because it’s such an emotional process. When an heir comes from out of state to handle the affairs of the estate and they realize how their aunt or uncle had been living, there’s every emotion involved with that. There’s overwhelm, disbelief, embarrassment, guilt and sadness, all of that goes into that. As a human to human, I can understand what they’re going through. When you’re able to build trust with that person, then that’s when you can put a win-win deal together.

Once you have this knack and people know that you do it and it spreads, somehow you become the hoarder home house flipper. Do people know you as that after a while?

MCFA 10 | Accessory Dwelling Unit
Accessory Dwelling Unit: To flip houses, you have to have some money in the bank and be in a place to fully leverage.


They do actually. When I show up to meet with the sellers, they’re less embarrassed because they know that I’ve seen it all. They’re like, “I don’t know if you’ve seen worse?” I say, “Don’t worry about it. I’ve seen it all. You can wait outside. I’ll go inside and take a quick look and come back out.” It’s almost a comfort for them to know that is what I specialize in so it’s not a shock factor to me when I walk in and see it.

Why don’t you briefly tell us what is ADU? Why are we all of a sudden hearing about ADUs and then the process? What exactly is this thing?

The state made it a new rule. It might have been 2017. I learned about this and ADU, it’s Accessory Dwelling Unit, and basically all that is, is a granny suite, a secondary house on a property and you can build these on single-family R1 Zone lots, and it’s statewide. They’re basically mini houses. I’ve got one that’s 750 square feet. With a bedroom, so that’s not so tiny.

You’re saying it’s a home that’s being new construction built?

I’ve been building them that way. I’m doing new construction. You can also bring in a manufactured home or even mobile home, but I’m not sure about that. You can also convert existing space. If there’s a large rumpus room or a garage that’s already existing on the property, you could convert that.

It’s what people typically in the past called granny unit or in-law quarters. People used to say those words right.

Sometimes with these in-law quarters, they could only be served a living space and a bathroom. With ADUs, you can have a full kitchen. It’s literally a second house with a full kitchen, full bath, bedroom. Everything a normal house would be just usually smaller.

If the lot is zoned for one house, you’re actually not having to obey those rules anymore. You can have this extra dwelling on there.

You’re able to do that.

It’s fairly new. How many ADUs have you done so far?

I’m up to eleven. I got excited about ADUs because the government makes some interesting decisions sometimes. I thought, “Here’s one they’ve made that could benefit the entrepreneurs/real estate investor. This can’t be true. How can you put two houses on an R1 zone lot? I better take advantage of this while it lasts.” I started building a couple and it happened by chance that these new properties I was buying to flip, I would check out the minimum lot square footage and then the environment of the city. The setbacks, the space to build it, they could all fit one. I thought, “Why not keep building these?”

Especially if you’re already there rehabbing the property. I thought you had to live there so that’s interesting that you didn’t live in some of these and they let you build the ADU.

It’s dependent city by city. I ran into that in a couple of cities. I don’t know how I’m going to get around that. I might live in one for a while and keep the utilities in my name for both houses. That is a roadblock on a couple of them I’m doing, but in the City of LA, you can rent both of them, no problem. I have a feeling that people are going to look back years from now and say, “How can this second unit be legal, and this property is zoned R1?” It will be a thing where it gets grandfathered in and the homeowner will have a nice extra value.

If they ever shut this down.

It will happen over time when they change the rules, so you have to take advantage of it while it’s still around.

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When you’re looking to build one of these, walk us through what is the process you go through to, first of all determine whether you can have an ADU on the property. What is the cost-benefit? Can you rent it out right away, or do you have to wait? How do you figure out whether you should put an ADU on a property?

The first step is to go to the city and get their ADU requirements because each city has a separate list of things that they require. The lot size has to be a minimum size. If your lot size doesn’t meet that minimum, forget it. You can’t do it. The setbacks for some cities are only five feet from the lot line, others fifteen feet. If you are standing in your backyard going, “I need to be fifteen feet away from that wall or that wall,” and you can’t roughly measure out a space that an ADU will fit, then it’s not going to fit.

Get a list of rules that the city will give you. The next step is to, if you decide you want to go ahead with it, is to get an architect to draw it out for you. It’s case by case if a homeowner thinks they want to do this or not. If they are going to own this property for a long time, and they want a way to have extra income, it’s great. Do it now while the rule exists because down the road, they’ll change the rule and you won’t be able to do this. There are not a lot of properties in Long Beach for example, that have a rumpus room attached to the garage. You can convert those spaces, so why not convert it and add in a kitchen and a bathroom while you’re legally allowed to? After that it’s grandfathered in, then you’ve got the option to have it as an extra room for family members or extra income if you want to rent it.

Go to the city, figure out what their requirements are, then go back to your property and see if the minimum is there. Is there a minimum square footage requirement for how big an ADU has to be?

It can’t be bigger than a certain percentage of the main house. One city, for example, it can’t be more than 45% of the square footage of the main house.

I heard in Redondo Beach, it’s something like that. It can’t be more than 50%. Have you encountered any minimum square footage requirements? People might say, “I could get a 250 square foot room there.

I don’t think I’ve encountered a minimum, but what I wanted to do is make sure you can fit a kitchen and a bathroom in all of them. If you think about the size, a studio would be 350 to 400 square foot space normally. That’s quite possible to have a full-size kitchen and bathroom in. For one bedroom, the smallest one-bedroom I have is 500 square feet. Anything much smaller than that and you’re too cramped. I don’t know if there’s been a minimum, but there are definitely maximums.

In the city of Lomita, there are a lot of bonus rooms that are living spaces. These 1930s homes that have an extra dwelling in the back. People fight to get those properties because there are very few single-family homes with those extra units. I’m definitely looking forward when people look back at this time, they’ll be, “I should have done it.” It makes the property more appealing to the next buyer as well, not only for yourself. Do most cities allow you to rent it out right away, or are you supposed to occupy it? Is your family supposed to be occupying that? I know part of this was the housing shortage. I imagine cities are letting people rent these out. Are you finding problems with that, holding periods maybe?

It’s all case by case, you have to know what you’re allowed to do and that’s why when you get those city requirements, you have to read through the detail of it. What I’ve found out with the City of Long Beach is if you rent the main house to a tenant, you have to be occupying the ADU. If you rent the ADU, then you have to be occupying the main house. With the exception, if your tenant in the main house also wants to be renting the ADU, that’s okay. You can have one lease that encompasses both the houses.

They want to make sure a homeowner is there somehow. They’re just trying to make sure that you don’t have multiple families on one property.

Luckily, the tenant in my main house in the Long Beach one wants to rent the back one as well. That is allowed as far as my understanding if I’m reading it right.

I know it’s hard because you have ADUs in all different cities, so once you know your property would qualify, you then have to get permits. How long does that typically take? On the construction, people are curious, how long does that construction take since it’s ground up in most cases? What are the average costs?

This is city by city too. Some cities are super easy to work with. Other cities are backlogged and they do not have a good process.

Would you say those are the bigger cities that are backlogged or the smaller? Is it the size of the city?

It’s how organized or disorganized they are. For example, the City of Garden Grove is super disorganized. You can call for an inspection and you might be lucky to get it eight days from now. You’re waiting for your sewer inspector to come. You finished the sewer and you call the inspection, and they can’t come for eight days. Your whole project is on hold for all those days, and sometimes they call and cancel because they can’t make it, or they’re too busy or whatever the case is. You have to call back and reschedule. They don’t have a good system in place. If you live there and you’ve got time, you don’t need to worry about things like this. If this is your business and you’re trying to flip this property, and get on with things, because time is money and your holding costs can really add up. Generally, it’s having a contractor who can stay on top of things for you. Learn the rules of each city that you’re going to do this in.

MCFA 10 | Accessory Dwelling Unit
Accessory Dwelling Unit: If your tenant in the main house also wants to be renting the ADU, you can have one lease that encompasses both the houses.


If you’re not used to that city, then you’re going in blindly. You know because you went through it, but someone else might not know how inefficient their planning department is.

Part of it is this is all new to all the cities, so they need to scramble and put together their rules for ADUs. Half of them don’t even know what they’re doing. They’re making it up as they go along. Try to talk to somebody in the city and learn as much as you can upfront so you know what your costs are going to be, and how long it’s going to take you. It’s not an exact science, unfortunately.

On average, how long would you say it’s been taking you to build one of these?

Once we finally get permits, the building is not too bad. Anywhere from three months on the quick side, up to five months on the slower side. The other thing is the rain slows things up too. Every time you get rainfall that’s stopping something along the way from moving along. I had delays with the foundation because it’s been raining so much here.

What would you say would be a good guess on what the cost would be to build one of these? Is there a price per square foot? I imagine you’re not putting fancy stuff into this unit. Is it pretty basic materials that you’re using or do you go fancy?

They’re basic. Generally, you have to match the look of the main house. You can’t do something wildly different. My actual construction costs have been so far 170 to 180 square feet. The soft costs have been anywhere, and when I say soft costs that would include architect drawings, structural city permits obviously, any other city fees school fees and park fees and stuff like this. You have to get sewer tie in fees, water meter fees if you have to get a separate water meter. Any other fees that go along with that. On the low end, $20,000, and on the high end, $40,000. Be prepared for that. I would say your minimums are around $20,000 for your soft costs. That’s before you even break ground.

That’s a lot of money for most people, but if you can rent out that back house now, that should pay for itself. The cost-benefit, people have to figure out how much they can rent their back house for.

Generally, I’m finding overall, to give you a ballpark on this, is meeting the 1% rule. Let’s say my soft costs and my construction costs total $180,000. I’m going to get $1,800 in rent a month. Is it worth it for somebody to spend $180,000 to get that 1% in rent every month? Hopefully, if you could get a loan on that or if you can pay for it free and clear, that’s a nice extra income.

It also adds more value than the $180,000 in resale value. If someone were to sell their home one day and it’s got this extra home, hopefully the rents gone up, it’s going to probably add value more than the money they spent on it, right?

In theory it should, but right now it’s not because none of these are getting appraises at the prices that they should be. That is because there’s nothing to compare it to. Because ADUs are so new, the appraisers don’t know whether to compile it as a single-family house or as a lot, or what they should do.

You can’t compare it to a duplex because it’s not legally a duplex.

We’re all trying to figure out how to deal with this right now. I would say if you’re doing it to resell, be very careful of that. I know a guy in Los Angeles whose buyer wants to pay X and the appraisal came in $125,000 lower. I don’t know how he’s going to solve that problem, but that’s what it got appraised at.

Normally when that happens, I suggest they have to make up the difference between the appraisal and the purchase price. If they want to still pay that purchase price, they have to put the difference in cash. I usually recommend the buyer to put less down payment. Shift some of their cash, unless they’re a minimum down payment person, then you can’t do that. Normally that means that they’re overpaying, but a lot of people want to because in their minds, the property is worth what they think it’s worth, not what the appraiser says. That gets tricky. Once you’ve built it, you can either rent it out or not rent it out. In your case, you’re reselling the property.

The batch I’m doing right now, I’m keeping and the ones that I’m going to end up flipping is a batch in LA. We’ll see how that plays out. Maybe there will be some comps on the market by then. Some of these are longer projects and I don’t anticipate selling them soon. If that’s the case, then maybe I’ll have some comparable by then.

This is a great idea because so many families can’t afford to buy their own home, so having this they can buy a home that has an extra home and they’ll be able to live there. Younger, first-time buyers could even buy together. They can buy a home with this ADU and each own a home even though they’re not related because living together is a whole other matter. If you’re friends at work and you want to invest together, you may not want to live under the same roof. It’s brilliant for that reason too. It’s helping people own a home sooner than later. For the properties that you already own, it’s worth doing the ADU because you also have a lower price point. You’re holding on to the property. Are you financing these? Are you using cash? How are you paying for all these construction costs? That’s a lot of money going out all at once for eleven properties.

It’s a lot of money. The ones that I’m flipping, when I buy them, I try to line up the financing in my head right from the get-go. I might get financing initially for the purchase. To keep paying money for construction that you’re not going to start spending until months from plans are approved. That’s money spent for nothing. Down the road, I’ve been getting second trust deed lenders for the construction part. On these ones that I’ve decided I want to keep, I’ve been coming out of pocket with the money with the idea that these things will appraise and then I can refinance the hard money that I have into a regular loan.

The trouble is they’re not coming in at full appraisal. I still have quite a bit of money into these properties of my own, which I wasn’t anticipating but it’s nothing harmful to me, because I can go and flip a few more houses and make that up. It’s tricky to figure out how to finance these. For the homeowner that might be reading and wondering how they can get financing, just talk to a couple of different bankers out there and figure out if there’s a way to do it. That’s all I’m doing right now to try and figure this out.

You can get a home equity line of credit, but that’s temporary in the sense that it’s tied to the prime rate, the interest rate goes up. Now you’ve got quite a big debt that could go up and end up in payment, so probably refinancing your properties is the best way. One of our people here, Keith says, “This is a fascinating topic, and it’s very informative, but it seems like it would be hard to do as a part-time job.”

I agree with that statement.

If someone wanted to build one on their property, they still have to be there every day. Make sure the construction is going. This would take a few hours to go down to the city. Study what the rules are.

My friend is doing this. She’s a homeowner and she has a job. She lives in Irvine. She found time to go down to the city on her lunch break and figure out how she could do this. From there, I referred her my architect. They were working together and now he does all the running around. It’s working with people you can trust. She gets him to go back and forth and do the design. She approves it. She’s around in the evenings to keep an eye on the construction eventually. I would say it’s not impossible to do this as a homeowner, it’s just a lot of work. That would be straightforward. I work more than full-time right now to manage all of this. I don’t want to work like a crazy person all my life. I want to do this, work hard for a couple of years to get this set up, and then hopefully the cashflow starts coming.

You’re building up more, because it sounds like based on your success, you can just stop now with the cash you have and possibly live off of that.

I had those rentals back in 2013 bringing in great cashflow, but they were owned with a partner and we decided we didn’t want to own those anymore, so we sold them. I had a chunk of cash and the hardest thing for an investor to do when you have a chunk of cash is to not do anything. They have to spend it somehow. This is what I’ve chosen to do with my money. You could take that same money and go to Memphis and buy two single-family houses with $180,000 and have $950 per house coming in every month. I could have done that. I could be a note investor.

The trade-off is what you decide to do with your money and how you want to invest it. I looked at what my longer-term plan is and that is to hold these things and get them paid off and have better cashflow than what I will get now off of them down the road because the loan will be paid off. I want to have these long terms and I want to have these to pass on to my family. It’s case by case with what people want to do and now they see this as part of their financial future.

Do you only flip single-family homes or do you flip bigger units?

I’ve done up to three units and that’s only because I tend to keep my resale prices under $1 million. I dipped in a couple of properties. One was a duplex and one was a triplex and fixed up, and they retailed for $1.2 million to $1.4 million. That’s more like paying $600,000 a unit. If I knew who my end buyer is going to be, it’s going to be somebody who would live in one and have the income from the other one to offset their mortgage payment. That made it a safer flip for me, but I don’t really get into multimillion-dollar stuff.

That’s not your niche.

That’s not my specialty at all.

You flip homes that are in the regular average person neighborhood. The average home, is that a good description?


Are you finding the flipping business more difficult now that prices have gone up? Are there still homes out there being referred to you that have enough profit in them?


That’s a myth that’s circulating out there. Maybe it’s people who aren’t doing the flipping correctly and aren’t looking for a good enough deal. People are like, “No one can make money flipping anymore.

No, they’re out there for sure. When you get a property by referral, it’s somebody who’s already trusting you because of whoever that referral source was. As long as you’re making an effort to make it a win-win, you’re trying to give them a fair price for the condition it’s in. I tell them right up front, “I’m in business to make a profit. I’m making a profit on this flip.” They understand that they want me to. I’ve had sellers come back five months later when they see it on the MLS and they’re like, “This house is beautiful. Thank you for restoring it to the way that we would want it to be remembered.” It’s comments like this. I didn’t lowball. I didn’t rip somebody off. I gave her a price that they thought was fair and they’re not out there shopping it or putting it on the MLS. You’re dealing directly with them so you can make an offer and know that’s going to get accepted.

Thanks for spending time with us. Thank you very much for sharing your time and your knowledge and hopefully, we’ll see you soon. I do know that you’re going to be a speaker upcoming. If people want to get a hold of you and ask you questions or thank you, how would they get in touch with you? Where could they see you out there in the world coming up?

There is an event on March 23. It’s WREN, Women’s Real Estate Network, and that is in Los Angeles. It’s a full-day event. Generally, do get in touch with me. I’m on Facebook, I post some comical property fines if you would like to be my friend. Send a message and say, “I heard you on the podcast,” so that I know you’re not some random personal friend. That would be the best way to connect with me is through that.

Thank you so much, Kristi. I’m happy you were able to do this and enlighten us on the ADUs and you’re doing much more than I even thought so that’s exciting. I look forward to seeing pictures on Facebook.

Thanks, Athena. I appreciate the opportunity.


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