I'm not sure if any local lenders will consider the property value once the ADU is complete when reviewing my loan application.

If you decide not to do a DSCR loan, the second home loan is a popular option, but there are lots of drawbacks for investors as it is really a product made for regular home buyers.

Taking out a loan for EMD would make it way, way too tempting to look past issues in DD and close no matter what.I'd also be concerned about the ability to close in general if cash is too tight to fund even the EMD.

@Marcus Auerbach and Jason , I found this data to be very useful and intriguing.I checked the spread between Income, Fannie Mae Loan Limit and , ZHI Median.Area income: Fannie Mae 1 Unit Dwelling Confirming Loan Limit: ratio$158k->$1,150,000:7.27x (my zip code in CA)$100k->$766,550:7.66 ( zip code 53209 in Milwaukee)so these are expected but lets deep dive:ZHI ratiozip codeArea income:ZHI Median: ratio ZHI to income,current spread ofCAzip:$158k:$791k: ratio: 5.0x : 0.68% !

The IRS cross-references your 1098s with claimed deductions, raising concerns if discrepancies arise.Private Lenders and Forms 1098: Private lenders are required to send Forms 1098, but only if they meet specific criteria:The private lender operates as a “trade or business,” distinguishing professional lenders from casual lenders like friends or family members.The loan is issued to an individual or a disregarded single-member LLC.The loan is a mortgage secured by real property.The annual interest paid on the mortgage was $600 or more for the previous year.The conditions leave some room for interpretation, particularly regarding the “trade or business” clause.

Regular conventional loan.

They claim to use the method of teaching that uses hard money loans to find your property, improve then rent.

As of right now the plan is to get a home equity loan once rehab is complete and pay off HELOC.

@Jeff Miller$40k in equity most banks will not allow that to be pulled, as they have strict loan to value requirements.Whether you put properties in or out of a LLC, does not matter who owns it, but if you are seeking to get bank financing for acquisition they will want 25% down.

The plan is to get a second home loan or any kind of loan really that allows a 10% down.