Best Way To Use Equity

[Aaron Harris]

I bought my first SFH in Inglewood,CA 5 years ago before the announcement of the new Rams stadium, now Inglewood is a hot bed and things are moving quickly. Last I checked my home was valued at 675k and I owe about 330k on it. I have an non-permitted back space that I am considering converting into a permitted ADU which would generate some nice cash flow. Currently I am in the process of renting my primary home which would bring in 3k/month and I am considering doing a cash out refi in the next few months to facilitate this conversion for the ADU which I believe would generate 1,500- 2k/month, which would essentially bring my new mortgage out to 500k. I'm trying to be wise and make very sound decisions in these next few months. My question is does this sound like a smart way to move forward or should I use a HELOC to convert this backspace into an ADU? Thoughts?