Financing an in-law suite?

[Ross Bowman]

I have a detached garage that I plan to convert to a small studio, to list on Airbnb. It is legal and within regulations where I live. I could use cash to finance this, but I'd rather use leverage. These are the methods I'm considering:

- 401k loan

- private home improvement loan

I can't use a HELOC because I don't have enough equity in the house itself yet.

Can anyone weigh in on some ways to finance this? Would either of the above methods be good, or is there some other way I haven't considered?