Dave will know the answer and I just wanted to post this in time so he could explain the financing while telling you, I believe, that your refinance will be fine.

WE did fine since like you I would only buy if there was substantial equity AS U need that when they stop paying then you had 3 to 6 months to get them out and then 10 to 50k to rehab..

Biggest problem with ADUs is it's only a matter of time before California starts fining those that are not rented out.

Which is fine.  

Do your research and you'll be fine.

If you can get hold of a reliable and honest builder, you will be fine (that does not mean you will not go over budget).Low CapEx, Little Hassle, Quality Tenant, You can manage new construction out of state for the first 5-years, Tenant May Stay longer (because is a brand new house) are few benefits of new construction.You may not be able to get close to the 1% rule though.Goodluck

If you have large equity gain, things are fine (and you can ride it out or simply sell).

If you don't do that and the neighbors complain like it happened to me, the city will knock on the door to see what's going on and give you like a $100 per day fine which I paid.

Pretty sure the fine locals on this thread will have even greater insight.As for Peniche - I'm curious as to how you ended up focusing on that area?

You won't be forced to de-convert unless you have violations...eventually the city will start fining you.Very critical terms are non-conforming (no violations - grandfathered in) vs. illegal (violations)...