Financing a Detatched ADU using Renofi.

[Jerome Morelos]

Hey BP, does anyone have any experience with financing ADU's? I am thinking of financing a garage conversion ADU on my primary residence. I have been researching different loan programs and Renofi stood out to me since they will lend based on the ARV of the home (90% LTV). ADU cost would be around 95-100k, monthly payments ~$800-$850. Projected rental income for the ADU would be $1,500. That along with renting out my primary residence would give me a net cashflow of about $700 (which is great in California).

Questions/thoughts:

1) If I decide to sell or refinance a home with a secondary home loan, would I be required to pay it off in full? 

2) California is offering a 40k grant to build ADU's using a qualified CalHFA lender. Only issue is most of these lenders require you to refinance your home which I want to avoid. But they are in the works of expanding to different loan programs that don't require you to refinance. Is it a good idea to wait for this to take advantage of the grant?

3) Will my property taxes and insurance increase from the garage conversion ADU?

4) Completely throw out the ADU idea and just open a HELOC against my primary residence to buy a second investment property.