They can then proceed with a 1031 exchange for their rental properties.I understand their concern about the 180-day timeline.

But I don't think you can afford it unless you're prepared to come out of pocket each month for holding the asset.In regard to operating expenses, consider PM, maintenance, true capex based upon the actual life-left of the components and upgrade timelines, vacancy, common electric and accounting.

Even on conventional renovation loans, most lenders and borrowers still use Certified 203k Contractors b/c the guidelines/timelines/rules/processes are almost identical.  

Engage with a Leasing agent - Depending on your timeline for construction, I'd engage with a good leasing agent as well who knows the area.

However, if your primary goal is to save for a new purchase, weigh the timeline of your next move against the potential ROI of an ADU.

Working with contractors requires clear communication and detailed project timelines to ensure that deadlines are met and avoid overruns.

Successful flippers are:- Building relationships with reliable contractors- Ordering materials well in advance- Being strategic about which renovations will truly deliver ROI Regulatory EnvironmentRecent changes to Phoenix building codes have emphasized:- Stricter energy efficiency requirements- More rigorous inspection processes- Additional permits for certain types of renovationsBe prepared for longer permitting timelines than in years past.Financial ConsiderationsThe financing landscape has evolved significantly:- Hard money lenders are offering more competitive rates (7-9%) than the 12-14% seen in 2022- Several Phoenix-specific investment groups have emerged that pool resources for flips- Traditional lenders now offer more renovation loan products tailored specifically to the Arizona marketThe Bottom LineThe Phoenix market in 2025 offers solid opportunity for house flippers who approach projects strategically.

Here are some financing options to consider:HELOC or Cash-Out Refi on Another Property – If you or your mom have equity elsewhere, this could be a more flexible and lower-interest option.Business Line of Credit – Since the property is in an LLC, you might qualify for a business LOC, which could cover construction costs.Private Money Lender – If you’re okay with 12-15% rates, a private lender could fund this as a short-term loan, especially if the guesthouse will generate strong income.Construction Loan – Some lenders offer short-term construction financing, which converts to a longer-term mortgage once completed.Seller/Partner Financing – Bringing in an investor or structuring a joint venture with someone willing to fund the build in exchange for a share of the income.Credit Card Stacking or Unsecured Business Loans – Riskier but could work if you need to bridge a gap until the unit starts cash flowing.Would love to hear more details—especially your timeline and expected rental income.

Everyone has a timeline of when interest rates are going to change.

Owner-Builder Construction Loan (Challenging but Possible)Some lenders offer owner-builder loans, but they usually require:✅ Strong financials (good credit, assets, low debt-to-income)✅ A solid construction plan, budget, and timeline✅ Proof of prior experience (renovations help, but formal experience is a plus)✅ A licensed contractor or project manager to sign off on the build2.