Nail the sheet of siding underlay directly to the outer plywood walls of the house. Start nailing the sheets from the top left to the right and move your way down to the bottom of the wall. Place a nail every foot (so four nails per square foot), especially around the perimeter.
Cut any access underlay off flush with the plywood that meets the foundation of the house.
Nail the first wood shingle to the bottom left corner of the wall. Allow 2 inches of shingle to be hanging below the siding underlay. Nail two nails into the center (measure it exactly) of each wood shingle. Have the nails be at least one centimeter away from the edge of the shingle.
Nail a complete row along the bottom in this fashion.
Cut a shingle in half the long way. Go back to your first wood shingle you nailed down and lay the half shingle flush with the edge of the wall and so an inch of the shingle covers the nails on the shingle under it. Make sure to measure so the shingles stay straight the entire length. Nail two nails into the center of the wood shingle. Have the nails be at least 1 cm from the edge of the shingle. Continue nailing full shingles next to this one the entire length, and continue this process up the entire wall. The purpose with the half shingle was to offset the gap. Remember to never have gaps on shingles align; always have them offset perfectly in the center of the shingle above and below it.
Cut the shingles at the corners, so one side always hangs over the width of a shingle. This way when you start to shingle the other wall, the shingles will butt up perfectly at the corners.