Depending on your market it may not make financial sense at all.

Hi Paul, it all depends on your comfort level. 

Expect a custom ADU to take 9–18 months, with 3–6 months for design and permitting and 6–12 months for construction, depending on complexity and contractor availability, and the speed of processing permits.

 @Sri Reddy it all depends on your goals.

It really depends.   

This would depend on whether your property is overvalued by the tax assessor and in turn you are paying additional taxes on that additional valuation.

I think it will also depends on state laws and a lot of information not present but the HOA rules and insurances are two different things.

While this is municipality dependent, if the contractor is not licensed you likely cannot obtain the necessary permits and approvals.

That will be an important piece to this depending on how you plan to source your capital.

I understand that if you live in a state that does not have a state income tax - you won't have any state tax liability, but based on $110K income, you would be in a 24% federal tax bracket...Distributions from an IRA or Roth conversion would be considered ordinary income and subject to ordinary income tax; capital gain tax is not applicable here, so I'm not sure why you are bringing it up...