The ADUs have not been a good RE investment. 1) The value added by the ADU addition is often significantly less than the cost of adding the ADU.

If you were to invest $100K+ of your own money into one property, where would you go?

Hi,I'm a Security Engineer by day and looking to learn more about real estate investing.

Investment Info:Large multi-family (5+ units) buy & hold investment.

Short answer is as little as possible.The long answer is it depends on the deal.Typically you end up in a subject 2 situation when the current owner has little or no equity in the property, the current advantage of subject 2 properties is that most mortgages are below current market rates.Keep in mind when acquiring a property subject 2, in most instances you are not notifying the current lender of the change in ownership, and most if not all mortgages have a due on sale clause, which is the lender's decision if they want to enforce it or not.I personally like the idea its a great way to get investment properties with low rate loans, that with most likely appreciate in the coming years.

Investment Info:Small multi-family (2-4 units) buy & hold investment.

Investment Info:Small multi-family (2-4 units) buy & hold investment.

Read Brandon Turner's Rental Property Investing Book and have been listening to the podcasts.mi

He would need to rely on one of the other tests, most likely #4 - significant participation, i.e. would need other investments outside of this partnership, and most likely other STRs. 

Quote from @Robert Bell: As a private lender, we use reserve funds as a way to gage whether or not someone is financially ready to take on a real estate investment.