Build an ADU or start BRRRRing?

[Vicky L.]

Dear BP people -

We are looking for advice/opinions. We took out a HELOC to build an ADU in our backyard last year. Before we've actually started building we discovered BRRRR. Now we have to decide whether to build the ADU or just start the BRRRR process in an out of state city (we live in Southern California). We have a few scenarios to consider.

1. Build the ADU then refinance and start BRRRRing
2. Forget the ADU and start BRRRRing using the HELOC
3. Forget the ADU and HELOC and refinance the house and BRRRR with that money

The ADU would produce a good rent and it costs about 130k. The rent would be going to paying back the entire HELOC in about 10 years. I'm not sure that qualifies as cash flow.

We are 60 and 56 years old and want to get some BRRRRing done so we can retire out of state by the time hubby is 70 (with some cash flow).

What do you experienced investors think? We appreciate your comments and insight.

[Jaysen Medhurst]

@Vicky L., I'd go BRRRR. I doubt you'll add $160 of value to your home's value with the ADU, though I know nothing about your market. That kind of money will go a lot further in another market. BRRRRing MFRs will get you way closer to your goal faster.

What out-of-state markets are you considering?