Financing an ADU Without Using Home Equity

[Zach L.]

I have a duplex in Los Angeles and I am ready to add a two-unit detached ADU to the property. I believe I would need to finance ~$140k if I were to move forward in the near future, and even if I could qualify based on my personal DTI I don't have enough equity to make a meaningful dent by doing a cash out refinance, so that isn't a viable option.

Has anyone had luck with finding a bank or lender that will lend on an ADU project based on the income the ADU will generate? I'm confident the two units could generate at least between $3,000 - $3,600 combined per month, potentially more depending on the unit mix, so I feel even an outrageous interest rate could potentially make sense for the $140k loan.

I appreciate any suggestions!