Real Deal Case Study: Creating Cash Flow & Equity with ADU in Salem

Real Deal Case Study: Creating Cash Flow & Equity with ADU in Salem
- Investor Name: Gene Murashko
- Strategy Used: BRRRR (Buy, Rehab, Rent, Refinance, Repeat) with ADU addition
- Market: Salem, Oregon
- Deal Type: Single-family home with ADU addition
- Investment Amount: $280,000 Purchase, $220,000 Rehab (ADU + Main House)
- Projected Equity: $225,000
- Passive Income: $3,000 - $4,000 Monthly Cash Flow
The Deal Overview
Gene Murashko, a general contractor turned real estate investor, took on a unique project in Salem, Oregon. Initially purchased through a Zillow auction, the property was intended to serve both as a personal residence and as an investment. Gene applied the BRRRR strategy and added a valuable ADU (Accessory Dwelling Unit), which allowed him to not only live in a newly renovated home but also generate a significant monthly cash flow. With an investment of $500,000 (purchase + rehab), Gene was able to force appreciation through strategic renovations and the addition of an ADU, bringing the property’s value to $725,000 and setting himself up with $225,000 in equity and consistent monthly rental income.
The Numbers Breakdown
- Purchase Price: $280,000
- Rehab Costs (Main House + ADU): $220,000
- All-In Cost: $500,000
- After Repair Value (ARV): $725,000
- Projected Monthly Rental Income (ADU): $2,700 - $3,000
- Monthly Cash Flow: $3,000 - $4,000 (Post-move to Maui)
- Equity Built: $225,000
Challenges Faced & How They Overcame Them
Gene faced several challenges with financing and zoning. The original plan was to use an FHA 203(k) loan but the property appraised below the necessary value, leading him to secure hard money instead. Additionally, navigating zoning regulations for the ADU in Salem was a learning experience. Despite the difficulties, Gene tapped into his network, including borrowing from his uncle, to finance the project and successfully complete both the main house and ADU renovations.
A Life-Changing Return
By the time the renovations were complete, Gene had $225,000 in equity and a property that generated $3,000 to $4,000 in monthly cash flow. What started as a personal residence with ambitious goals quickly turned into a lucrative investment. Even after moving to Maui, Gene continues to earn significant income from the property, renting it out to travel nurses.
The Learning Experience
- Creative Financing: Gene’s journey involved using hard money, personal loans from family, and a subsequent HELOC to finance the project.
- Maximizing ROI: Adding an ADU significantly increased both the property’s value and rental potential, allowing Gene to nearly cover his mortgage while living in a much larger home.
- Zoning & Regulations: Understanding local ADU regulations and taking advantage of city incentives allowed Gene to add value while keeping costs down.
Final Thoughts
Gene’s BRRRR strategy combined with the addition of an ADU is a powerful example of how creative thinking can generate both equity and passive income. His willingness to take on a challenging project, navigate financing hurdles, and maximize the property’s potential has led to both personal and financial success.