Compare that to the performance of a new property (with that equity unlocked but also with a different interest rate as @Katie Ripp said).

Why don't you pull out the equity and use that cash?

$400k equity is producing $1600/month cash flow for a return from the cash flow of 4.8%.  

If it adds $100K of value then the initial negavie equity is $100K.Now for the cash flow, $200K for $1800 rent is not going to produce decent cash flow with ADU financing. 

Quote from @Chris Seveney: @Brian Burke I am also curious what the investor equity position is.

Wondering if you have advice on me just being the bank, where I purchase a house and structure a rent to own with him and have him build up a 30% cash down payment and some equity and then me sell the house to him at a locked in price.  

Waiting until you get a deal under contract to then see if you can put together the debt and equity is a recipe for disaster.

I also purchased these while residing in CA!

My heart rate goes through the roof as I have about $90k in equity in that house. 

😵‍💫 Do I buy for cash flow or equity?