Turn my primary into an DADU STR or Downpayment on a new property

[Nick Littleton]

Hey all,

Looking for general advice. My wife and I are currently living in our primary house, and we have been trying to think of creative ways on how to house hack our primary to lower our DTI and scale faster. We probably would have house hacked before buying a primary residence, but that was before we started educating ourselves with real estate investing. Short Term Rentals are allowed where I live, as well as DADUs. My thought process is to cut out a piece of our property (we have 10 acres) that is surrounded by trees but close enough to the house to run power/plumbing and build a DADU/tiny home with 2 bedrooms to rent out on AirBnb/VRBO.

However, this would cut deeply into our reserves and our "investing" savings that we have created, and would take some time to gain that back. The whole idea would be to use our cash to build it (ideally little to 0 leveraging), and turn our primary into a cash flowing house hack/STR.

I love this train of thought, not the lack of money, but the idea of lowering our DTI to be able to qualify for more/larger loans and scale faster. However - I also think I could achieve this by just utilizing the same amount of money as a down payment, ideally shooting for 4-5 bedroom house (more beds more heads), buying another property that I could run as a STR, and now we have an additional appreciating asset. I am torn - and I don't know what direction to go. Looking for advice from people out there who are more experienced that I am. Thank you all in advance.

Nick