Help with ROI calculation on basement ADU

[Gerald Joyce]

My wife and I just got done rehabbing a brick two flat in Ravenswood Gardens. All new electric, plumbing, HVAC, etc. We didn't touch the basement. The basement has a 7'6" ceiling and dedicated doors for both ingress and egress. The GC said it's a good candidate for an ADU and that she can put a 3 bedroom, 1 bath unit in there for $120k the has flood control, dedicated utilities, etc. I would estimate that we would have to carry the construction loan for 6 months before we could rent it for $1600 - $1800 a month. What is the formula that you guys would use to calculate ROI and whether the investment was worth it? Any ballpark idea what percentage our property taxes would go up if we went from 2 to 3 units and how does that get plugged into the calculation? Anything else that should be added and calculated in? We have worked with this GC in the past and she is generally very good at giving a number and sticking to it. My wife and I currently live in one of the existing apartments. If we moved out and didn't do the ADU, the building would cash flow about $500 a month (more, if rates come down and we refinance). If we stay, our tenant pays more than half of our mortgage and we live in a much nicer apartment than we could probably rent. I would like to know if the investment in an ADU makes sense. I spoke to a builder friend in the neighborhood who has done a ton of two flat conversions and McMansions in the St. Bens/Roscoe Village/Lincoln Square area and after 5 seconds of thinking, he thought it was a good idea. That's off the top of his head though. I was wondering what you guys thought.