Ideally you do this if the rates are lower so you don't want to cash out refinance a property if the interest rates are higher than your current rate.

It is much easier to talk about being conservative when the sponsor implies that they are CHOOSING to keep millions in reserves or buy a low interest rate cap.  

If rate come down and  you refinance out of current loan, another appraisal will most likely be done again, no need to pay it twice.  

I have been getting crazy numbers from contractors and I understand California isn't cheap, but I was hoping to get advice on how to find someone that's reasonable and dependable. 

This doesn't even account for the equity gain that is likely to be seen throughout the build processOn the flip side, depending on the location of your parcel, it could be in a high demand area that you could cash out by selling the property quickly.

It depends on their lease and when it is up.

What happens after that will depends on which of you has more reachable assets or, in case neither of you do, the bankruptcy law.  

Usually the interest rate and points are a little higher up front than a traditional lender but it's a good alternative to bringing on a partner.

Assume 8% mortgage rate and 30-year term.

What has been the vacancy rate?