Most investor utilize short term hard money debt to scale their flipping operations where the lender will fund 80+% of the purchase price and the rehab budget which can allow investors to work on multiple projects at once.

A standalone ADU is almost always going to cost more than doing an addition, so the value added or cash flow increases will have to justify each.I work with a team of investors who will buy SFR homes then build a new ADU on the lot and add a separate drive way and meters for utilities in North Texas. 

However, if you want to flip you may be able to make irregular chunks of income quicker that can make up the difference.Which leads me to the utilization of your equity.

The extra cost is typically well worth the benefit. 

Good tenants do not typically apply for overpriced apartments.

The property cash flows at a 15% ROI…………………..before insurance, debt service, utilities, management, vacancies, repairs, maintenance, payroll and property taxes7.

Since your friend covers utilities, this offsets some of your cost.

You find the house completely trashed with missing appliances and cabinets, tenants were cooking meth, windows broken, etc. 6-8 months of unpaid rent, unpaid utilities, thousands to empty the abandoned property and trash, $50,000 to completely renovate the property and make it rentable again, plus all the time, energy, and stress along the way.I would actually argue this is pretty common and not even the worst-case scenario. 

Typical rehabs I'm looking at in TB are looking like 250-300 purchase with renovations costing around 40-60k.  

It was very difficult for us to find a bank to refinance the deal and also difficult for us to procure a buyer for the condos we didn't want.The cap rates typically traded higher than a simple ownership interest.