The problem: America needs more homes, at lower prices. The fix? Make them waaaay smaller and plunk them down in your own backyard.

Real estate investor Paul Dashevsky has been putting this simple plan into action since 2020, when California eased restrictions around adding accessory dwelling units (ADUs) to properties with a primary residence. Just last year, he finished his latest project: a 750-square-foot two-bedroom, one-bath domicile on a 9,500-square-foot lot where he was already renting out a 1,100-square-foot house.

“Since I already owned the land, I felt that it was a good investment to add an ADU on the same property, which I could rent out,” Dashevsky points out. “It’s certainly much cheaper than buying another home.”

The ADU cost $250,000 to build and is now occupied by a family of three paying $2,700 per month, amounting to $32,400 per year in rental income. To maintain privacy between his tenants, Dashevsky fenced off separate yards for each unit and also lowered the rent for the original tenants to reflect that they no longer have the entire property to themselves. So far, this arrangement has worked out great.

“I have several rental properties with both a main house and an ADU we built, and we’ve had zero issues between neighbors. Our tenants love them,” Dashevsky says. “ADUs attract tenants that want more privacy than an apartment [offers], but may not be able to afford a single-family home. For investors, it’s an opportunity to double your rental income from a single property.”

The ADU boom

Tiny homes are popping up in yards across the country, and it’s not just because they’re budget-friendly and cute as a button. A growing number of states have loosened laws around ADU construction, and California leads the charge with 26,926 permits filed last year (followed by Washington, Oregon, and Colorado), according to renovation site Realm.

ADUs differ a bit from true tiny homes in that they’re built on properties with a larger primary residence, making it easier to hook up electrical, plumbing, and other necessities. ADUs assume many forms, from freestanding structures to attached units such as converted basements, attics, and garages (also called junior accessory dwelling units or JADUs). They’re also used in many ways, according to a survey by Villa: to house friends and family (56%), as an office (39%), or as a short- or long-term rental (46%). Some ADUs are built around themes to make stays more memorable, from treehouses to Snow White’s cottage.

But although it’s getting easier to build these mini-homes, that doesn’t mean it’s a cinch. Each state requires an application and has its unique regulations on aspects from size to setback. HOAs may have their own rules to follow, too. Financing can be tricky, with homeowners often tapping into their primary residence for a refi or home equity loan, or line of credit.

“Building an ADU is a process, with a lot of experts and moving parts along the way, and it does take time—about 12 months in total from planning to completion,” says Dashevsky. Shady ADU operations have also surfaced, flaunting renderings of properties that never end up being built once the company makes off with a hefty upfront fee.

“Finding the right team can make or break your ADU construction experience,” warns Dashevsky, who is co-CEO of Maxable, which connects homeowners with ADU specialists. He recommends vetting professionals carefully, adding, “I was fortunate to find a great contractor, but I still found it was important to meet with them at the project every week to discuss any issues that arose.”

In the end, the effort was worth it—not only for him financially but also because Dashevsky was providing comfortable quarters for a family that might not otherwise afford it easily.

“Our latest tenants are a young family who fled Ukraine with a 10-year-old daughter and are starting a better life here in America,” says Dashevsky. “As urban populations swell, the ability to build smaller homes will be key. ADUs offer a pathway to fostering community resilience by creating affordable housing options that work for everyone.”

You can download this ADU starter kit to learn more about the legal landscape, costs, and financing options in your area.

The average home is older. A Redfin survey found that the typical home purchased in the US today is 36 years old, up from 27 in 2012. This highlights how a shortage of new construction has aged America’s housing stock at a rapid pace. Meanwhile, the average age of first-time homebuyers is also at a record high of 38, up from 28 in 1991.

Brand-new homes are getting cheaper. A survey by Realtor.com found that the cost of new construction dwindled by 0.3% year over year in Q1 to $448,393, the lowest premium for any first quarter since 2020. Another brand-new home bonus? Builders offer incentives such as mortgage rate buydowns that can lower the cost further. Meanwhile, existing home prices rose annually by 1.4% to $394,963.

Rent is rising faster than wages can keep up with. A Zillow report found that rent for the typical US apartment increased 28.7% over four years to $1,858; rent for a single-family home shot up 42.9% to $2,256. Over that same period, median household income has grown by only 22.5% to about $82,000, which means the gap between what we can afford and what it costs is widening. Currently, there are eight cities where a six-figure salary is needed to pay rent comfortably; New York City tops the list at $135,746.

Private listings can lead to regret. A new survey by StreetEasy/Harris of 500 New York City home sellers found that nearly three in four were advised by their agent to list their home privately to a small group of buyers and brokers rather than to the public at large. Yet one in three who took this recommendation regret the decision, more than double those who listed publicly. Although there are reasons to list privately to avoid unwanted attention, sellers should fully understand the pros and cons before deciding what to do.

If you build it, they will come. A growing number of cities are joining forces with sports teams to erect stadiums and breathe new life into downtown areas. In Washington, DC, the Commanders announced a $3.8 billion deal to build a 65,000-seat football stadium set to open in 2030. In Nashville, the Titans are erecting a $2.2 billion megaplex with hotel and office space slated to open in 2027. The Athletics, aka the A’s, are moving from Oakland, CA, to Las Vegas to live it up in a $1.7 billion casino-resort opening in 2028 (the baseball team has temporarily relocated to Sacramento in the meantime). Over the next 15 years, Klutch Sports estimates that $100 billion will be poured into sports-anchored mixed-use districts, which sounds like a win-win for sports fans, real estate, and hot dog vendors alike.

Ryan Gibson used to fly planes for Delta and other airlines, but found himself unemployed early in his career when one small-scale airline went belly up. Realizing he needed stable job security, he carved out a new calling in real estate. Here’s how he grew a storage unit empire as the president of Spartan Investment Group and all the crazy things he’s discovered inside his facilities.

What inspired you to invest in real estate? “At 21 years old, I was living my dream as an airline pilot. I thought I had made it. Six months later, I was out of a job—my airline went bankrupt. That was my wake-up call. Your career, your paycheck, your security, it can all disappear in an instant. That’s when I started thinking about passive income and set out to build something that couldn’t be taken away from me based on a bad quarter or a corporate decision.”

How did you break into real estate? “In 2014, I teamed up with my former neighbor to launch Spartan Investment Group, focusing on self-storage real estate—an asset class that’s stable, scalable, and built for long-term wealth. In a decade, we’ve grown into 150 employees and more than 30,000 self-storage units covering 4+ million square feet across 14 states. Our success has been fueled by the support of our robust investor network—5,000 investors and counting—that has helped us raise over $450M+.”

Do you watch the reality show Storage Wars, and is it true to life? “There are several elements in Storage Wars that are spot on. Self-storage operators do hold auctions, but the show plays them up, builds the suspense of what’s behind the doors, stages bidding wars with an auctioneer to create some conflict, and ends with a big reveal, where the highest bidder either wins the jackpot or inherits junk. Some facilities still put on this production, but in reality, most auctions today take place online. There are several websites where operators auction off unclaimed units. What you’re able to see beforehand can vary. You may be able to glimpse what’s inside through photos, but it could also be a unit where everything is boxed up, and you don’t know what you’ll get. So the unknown of what’s inside and the fight to be the top bidder are all very real.”

Do you ever end up with unclaimed storage, and what do you do with it? “We end up with unclaimed storage all the time; 99.9% of the time, the contents end up being donated or taken to the dumpster if it’s not in good condition. But you can’t just take people’s things. You have to jump through several hoops. In one instance, a customer passed away. We reached out to their spouse to see what they wanted to do with their things. She said, ‘Just get rid of it, I don’t want it.’ Sounds simple, right? Nope! We had to obtain the death certificate and verify her legal authority to permit us to take control before we could even touch the contents of the unit. So while people do abandon storage, you have to be careful and ensure you have the legal authority to dispose of it.”

What are some of the wildest things you’ve seen inside units? “We’ve seen all sorts of crazy things at our facilities, including a collection of jars filled with teeth. One day, at one of the first facilities we ever purchased, our manager was doing a routine walkthrough and spotted a door, just slightly open. He heads in to investigate and finds another door—but this one’s got a sign reading ‘Knock hard if you need me.’ Naturally, he bangs on it, and out pops a customer in his bathrobe. Turns out, this guy had built a full-on apartment inside the storage unit! He rigged up the sprinkler system for water, had a grill he’d wheel out into the hallway like it was his patio, and even invited friends over to hang out. We were shocked but impressed by his setup.”

What advice do you have for others who want to follow in your footsteps? “The self-storage industry has faced challenges. A major milestone was the launch of our construction and property management subsidiaries, which allowed us to take full control of every aspect of our business—from acquisitions and development to property and asset management—enabling us to operate and scale more effectively. After investing in 100+ real estate deals, I’ve learned to anticipate that something will always go wrong. The market shifts. The numbers don’t pencil out. No matter how much due diligence you do, there’s always a risk you didn’t see coming. As a real estate investor, you have to remember the goal isn’t to avoid every mistake. That’s impossible. The goal is to make sure you don’t make the same one twice. That’s why I document everything: what worked, what didn’t, and what to watch out for. Use those experiences to learn and evolve your strategy, and you’ll be in a great position to succeed when the next opportunity comes along.”

BRRRR isn’t just the sound you make when it’s freezing outside; it’s also a real estate investing strategy that stands for Buy, Rehab, Rent, Refinance, Repeat. You basically find a fixer-upper, give it a glow-up, rent it out, then once you’ve built up enough equity, you cash it out to buy another property to replay this process all over again.

Initially popularized by the real estate investment site BiggerPockets, the BRRRR method exploded in popularity in the past decade, “especially among small-to-mid-level investors looking to scale rapidly without constantly injecting new capital,” says Levi Rodgers, real estate broker and founder of the VA Loan Network in San Antonio.

But BRRRR has gotten trickier lately: “The whole strategy hinges on that last ‘R’ aka refinance, and with higher interest rates now, that step’s a lot less forgiving,” points out Char Hiaring, founder of Sell My House Idaho.

But BRRRR has evolved to stay viable in 2025. “The key is to focus on undervalued properties in markets with strong rental demand,” says Alexei Morgado, real estate agent and founder of Lexawise. “Another technique is to try to predict rises in rental property demand by focusing on cities experiencing population growth and good job opportunities. Still, with the rise in construction and labor costs, it is important to budget accurately for renovation costs to avoid unwanted surprises.”

Here’s where you can read up further on the BRRRR method.