ADU vs Separate Property

[Kerstin VanZanten]

We currently have an STR that we purchased in 2020 for $419K, which cashflows 70K in revenue. We have just taken out a line of credit on our primary residence and have 300K to invest. We have several options:

1. Spend $300K to add an ADU to our current home on five acres in a vacation destination that could generate a similar ROI as an STR. The structure itself would be unable to be leveraged for future investment but would add value to our primary residence. We also plan to use our primary residence as an STR once the kids leave for college in six years, and we start spending more time in Southwest France.

2. Split the $300K to purchase two additional properties in the exact location as our current rental, a similar unit, in the same building would now be $675K, and would significantly reduce cash flow vs. our current STR. A big concern is that if we don't get enough snowfall or have a bad fire season, all three units could sit empty.

3. Invest the money overseas in a property in Southwest France that we can rent now with smaller cash flow but solid appreciation.  We will live in it part-time when we retire in eight years.