There were a lot of variables and scenarios we discussed that led us down this path.

Too many variables and way too complicated to go down that route.Try to navigate around that issue and focus on WHY they want to sell.  

So every variable, and every unknown is an uncertainty that I need to flip into a confirmed piece of information as I move forward.

If you actually CAN build an ADU for 150k, that could be a good return (in Salt Lake, if you could build an ADU for 150k, it would probably cashflow pretty easily...but, we don't have the rent control laws you mentioned).Second, HELOCs are usually variable rate, and we all know what's going on with rates...Obviously, any plan that hinges on use of HELOC funds and refi'ing at some point in the future should have very conservative numbers to accommodate the all-but-guaranteed interest rate hikes that are coming.  

There are a lot of variables to every investment decision.

Which would probably cost around $650 a month in non variable expenses (basically PITI on a 30 year note).

Even though you did provide a lot of relevant information, there are just too many variables for anyone to give you an accurate answer. 

Terms: - 2-year payback- the loan was from a variable HELOC; amortized monthly payments based on the variable interest rate of that month In the first year, I managed a few cosmetic upgrades to each room and turned the basement into a functional workshop.

Terms: - 2-year payback- the loan was from a variable HELOC; amortized monthly payments based on the variable interest rate of that month How did you add value to the deal?

@Eric Fichera Fellow Staten Islander here; Lots of variables.