House Hack Financing

[Misty R.]

My husband and I purchased our first home about three years ago for $314,000 with a mortgage of $308,000. Our current mortgage payment is $2100. The property should now be worth approximately $405,000 and we currently owe $290,000 on the mortgage. We have PMI and would like to refinance at some point soon to get rid of that $325/month. We are able to build an apartment on the property (we are zoned for it) which we plan to build above a new three car garage. The two car garage would be for primary residence leaving a one car garage for upstairs rental unit of approximately 900 sf. We believe we can get at least $1800/month for the unit. Our next door neighbor just rented our her 400 sf unit with no garage for $1400. I estimate the project will cost $75,000-$100,000.

I'm looking for ideas on the best way to finance the project to maximize the returns. Cash out refinance, HELOC??? We can also probably come up with $25,000 or more in cash in relatively short order. I've heard there may be loan products that will look at the value of the home after construction in determining how much cash can be taken out but I haven't done enough research yet to know if that's accurate.

Our goal is to rent the back unit out for a couple years cutting our mortgage payment in half or so while we stockpile cash for our next deal.  We ultimately plan to rent out both the primary residence and the back unit and I believe we can get at least $1000/moth positive cash flow, maybe more.  I believe the primary residence can be rented for about $2500 if the rents stay relatively stable.  

I'm hoping to pound this out within the next year.  Any thoughts or tips are much appreciated.