Best way to spend 150k HELOC for passive cash flow?

[Keenan B.]

Hi folks,

I've currently got 150k equity at my primary residence. The lot is spacious and there is a great space in the front yard for an ADU that would be very removed from the part of the property we spend our time on.

That said, I’m brainstorming what to do with this 150k equity. My goal right now is to increase passive cash flow, and I’m thinking that putting an ADU in the front yard might be my best option. 

The property is in Bend, OR, and I would be able to build the ADU for ~100k (family contractor discount) and rent it out for ~1500/month.

I thought I would see if there is any input on any better cash flow options that I might consider as I decide what to do with this 150k equity. 

Any input would be appreciated! 

[Mohammad Parwez]

I would check for the following before jumping into any conclusion:

1. Check with local county/city build code regulation to see if an additional ADU can be permitted.

2. If you live in a HOA controlled subdivision then check the CC&R to see if this is allowed legally.

3. The HELOC rates depend on daily interest rates and you may end up paying different amount each month so profitiablity will differ for each month. Although it is a great way to leverage your home equity but with high interest rate scene it may not be very profitable.

4. It would be a better idea to take that equity out and use it to put a downpayment for a multi family unit may be a fourplex. That way you can get returns earlier than having a new construction.

At the end the decision is yours but think about all different options.