Should I invest cash out refifunds into ADU or another strategy??

[Shalaye Camillo]

I just did a 60% LTV cash out refi on my 2 family home via an amazing loan program at 3.75% for 30 years! After upgrades in both units and the exterior, I'll have about 130k left to invest. I want to make the smartest decision with these funds and not sure of my next move. I had always planned to add a 2 or 3 bedroom ADU to my basement, making it a legal 3 family home. The cost to do this would probably be around 130k. The way I look at it, that's like buying a 2 or 3 bedroom unit in the city of Boston for 130k, which does not exist. If I do this, I can possibly refinance again with the same program and get another 200k out. That's assuming the property appraises for about 1.2 mil as a 3 family, the loan program still offers the special low rate, and I qualify. If it were a 3 family right now, the house would definitely appraise for between 1.2-1.3 mil. I'm just not sure about what it will be 12 months from now.

If I don't do the ADU, I'd like to invest in another multi unit building, at least 6 units. I would have to put at least 25% down which would likely take the whole 130k here in Mass. Any ideas of how I can really maximize and grow these funds I currently have? Should I do the ADU and try to refi again? Put that money down on another multi unit building...or something else?? Thanks!

[Lien Vuong]

Congrats on the purchase and smart refi timing! $130k to an an ADU won't likely add in the value you're thinking of for the refinance because it is not a legal third unit and the next buyer would have to be an owner occupied person to rent that additional space out. That's speaking about general ADUs in the Boston market. I see a lot of value in investing this fund into a second property as long as it meets your criteria and has additional value add potential. I've been able to accumulate much of my portfolio from cash out refi and HELOCs like this to grow and grow and I look forward to seeing you add more units!