I have one rental property in San Marcos, CA (North County San Diego), which was my primary residence for several years before I moved to Orange County.

*This is a VERY simplified example, you'll want to use amortization tables and more to be precise.For maximum portfolio growth, you might consider buying a new primary every 12 months.

I can't house hack because of the family situation so I can't be approved for regular loans that require you to make the property your primary residence. 

REI Central and The CHS Circle are the two primary meetups.

If that is your primary motivation then I wouldn't encourage that.

I have a single family house (primary residence) and am wondering the pros and cons of selling to a builder?

You are free to build whatever you want, sell the house once is finished, and the lien-holder (original seller) is paid off through title when the new house sel The seller is wanting us to build him a new primary residence.

My primary home is in San Diego and insurance is difficult to get and keep. 

For example, I hate to sell anything, but I am selling two properties to raise funds for a new primary that meets my goals.Study the market and really lock in what it will rent for.

Long story short, I have no primary home and the property the guesthouse is being built on is a LLC with 3 years remaining of 20k PPP.