Finance ADU now or wait?

[Myles Blackwell]

Hi all, I am curious what opinions folks may have about this ADU opportunity.

My partner and I recently bought a duplex in Vermont Square that we owner occupy. When we move out, it will cash flow $300-$400 a month after all expenses. We have 2 400sq ft single car detached garages in the backyard, and want to eventually convert at least 1 into an ADU.

We do not currently have the cash or equity to utilize to convert a garage.

What would you do? 

A) Use a renovation or construction loan to convert. If you would choose this option, what type of loan would you do? This lists lots of options (FHA 203k, Fannie Mae Homestyle Renovation, Shared Appreciation agreement, private money, construction loan, renovation loan etc.). What do you think of doing a renovation loan and then refinancing the home loan and the renovation loan into 1 loan?

B) Move out and buy homes in lower cost markets using low down payment loans. We work remotely so it fits our lifestyle. Do this until we have the equity to HELOC or cash out refinance to convert this Vermont Square garage (we have family here we could stay with to be around for the conversion).

What would you do? I am still learning about the factors regarding each option.