Don't know which direction to take - analysis paralysis

[Ashley Bitner]

Hi there,

Long time listener, first time caller ;)

I'm located in coastal Southern California. I live in an HCOL area, walking distance to the beach. I have a $250k HELOC, which I had been planning on using to build an ADU in the backyard. A few friends in the neighborhood already have the same, and they generate approximately $3000 monthly rent. It turns out my garage isn't permitted (?!) (The house was built in the early 40s not sure when the garage was built, but the city doesn't have any record of it being permitted). This opens up a whole new can of worms and makes it likely that it would need to be demo'ed and rebuilt along with the ADU. Estimates I'm getting for this are in the $350k range (yikes). I wonder if I'm better off buying an investment property rather than building the ADU. BUT... I don't feel confident enough to buy out of state and the property taxes/interest rates/home prices are so high anywhere around me. I feel like I waste days trying to decide: build the ADU? Buy somewhat locally (Julian? Idywild? Borrego?) and try to STR? Sit tight and save more liquid and wait for the prices to drop? (Trying to time the market is not ideal, I know). I've considered selling and buying a place that already has an ADU but I purchased in 2008 so my property taxes are low and I'm locked into a 2.6% rate. It seems crazy to ever sell this place. Anyway, I have major analysis paralysis trying to decide which direction to take. Would love to hear some thoughts.