Need input on my house hacking strategy in San Diego

[Cameron Weston]

Hi San Diego Investors,

First off, thank you all for taking the time to read this! I am new to REI but am serious about getting started through house hacking. After finishing some of David Greene and Brandon Turner's books, I think I have come up with a good strategy and would like to get some feedback on it.

Context
I am in my mid-twenties, no kids/wife, have ~200k in savings, make 6 figures, zero debt, and have an excellent credit score. I am currently renting and plan on staying in San Diego for a minimum of 3 more years. 

Strategy
My plan, as of now, is to use a private money lender to purchase a fixer-upper SFH with a detached garage in one of the following neighborhoods: North Park, South Park, Pacific Beach, Ocean Beach, Normal Heights. From there, I would like to convert the garage into an ADU, which I would live in while renting out the main house. After fixing up the main house and building the ADU, I would refinance into a conventional loan.

What I need help with

- Are there any giant holes in my plan that I am not seeing?

- What does the ROI in San Diego look like for a converted garage to ADU in terms of value add to the home?

- I am planning on holding out until December to see if the market cools down, is this a bad play? 

- In my spreadsheets, I am estimating the cost of a 2 door garage conversion with existing plumbing to be 80k. Does that sound ridiculous?

If you made it this far, thank you again for taking the time to read this! 

[Dan H.]

The ADU Is typically appraising below hands off construction costs. So thinking it is a value add is Typically only True for the income aspect (I.e. the additional rent).

Why are you planning on hard money loan? I think you may be better off with conventional financing because of the risk of the ADU appraising below the construction cost.

I think You cost is slightly low, but might be possible.  Look up Maxable online.  Do not believe everything they indicate but I suspect their construction costs that they listed are close. 

Good luck