Input on strategy to build ADU & rent house

[Sarah Szuhay]

Hi all! I am new to the real estate investment game and am trying to find a way to house hack to start bringing in real estate cash flow. I live with my partner in a very small single family house in Portland, OR (2 bed/1 ba, 800 sq ft) that sits on a fairly large lot. We are thinking about constructing an ADU in the backyard (ADU <500 sq ft), and living in the ADU so we can rent out the house. I'm thinking we could rent the house for ~$1700/mo. Detached ADU construction costs in Portland seem to average around $150k, but I'm hoping to find ways to do it cheaper (maybe ~$120k).

I still need to run numbers on the specific expenses to confirm there would be positive cash flow, but am currently just feeling out the concept. Has anyone done a similar project or have any advice/input to share? One specific question I have is around financing- anyone have creative finance strategies for construction loans, or will I need 20% down? 

I would appreciate any input on my proposed strategy. Thank you!

[Mathew Wray]

Morning Sarah!

The strategy itself is sound-with Portland having a housing shortage and no real signs of relief, I think that in the long-term, adding more housing to land you already control is a great idea. In the short-term, just be aware that there are likely some zoning changes coming down the pipe...I think they'll be favorable, just keep in mind they're coming.

There are banks that will loan on construction projects and different ways of financing that. Let me know if you need an introduction or two. 

Mathew