Unfortunately, I have quickly realized the mortgage is much too steep a payment to promote a net positive cashflow even with all rooms rented.

I know HUD only contributes $1,500 towards a junior lien settlement, but if the junior lien holder does not want to settle would HUD allow the buyer  to pay off the junior lien out of their own pocket?

Who is going to do the lumber take-off?

Hands off ADU addition will cost significantly more than $100k.  

From their credit report, it appears they are making regular payments and haven't been late with any payments on anything in several years, so perhaps they just put their wedding on the cards or something and planned to pay it off, but I don't know.

@Daniel Mendez As much as possible.If we do a holding agreement to take the unit off the market we try to get them to pay the first month rent and any other move in costs other than the security deposit, which they pay at lease signing. 

We also are considering closing off the brown door in the picture (access to the attic) and creating access elsewhere. 

And over two years you pay the remaining $280,000 off, meaning over $10k/month you send to builder?  

Cons: Property 1 has strong expected IRROption 2) Sell property 1 to pay off a construction loan on property 5 and purchase new SFR -- Pros: Improves cash flow by $1,000 / month, Adds $40k cash to bank account (after $30k loan repayment and $40k SFR purchase). 

However, we hope the, let’s call it the rebuilding stage, will level off here soon.