So we're looking at our second investment "door." We're considering both an AUD (in CA on our primary residence) or an out of the area condo or duplex/triplex. We'd be looking to use a HELOC either for the ADU or for the 20% down on an out of area rental.
Assuming 500 sqft 1BR standalone ADU would typically cost around $160K. For the areas we're researching, $200-400 cash flow is the target.
What calculations would we need to run to see what would be the best route for us?
Real Estate Broker · Los Angeles, CA · Member since 2018 · 300 posts · 146 votes
6y
There isn't a right way. You just put together the budget, cashflow analysis, and return analysis for each and compare. I would verify you can get a HELOC right now. Lenders have gotten super tight in the last 30 days.
Real Estate Broker · Los Angeles, CA · Member since 2018 · 300 posts · 146 votes
6y
There isn't a right way. You just put together the budget, cashflow analysis, and return analysis for each and compare. I would verify you can get a HELOC right now. Lenders have gotten super tight in the last 30 days.
Real Estate Broker · Los Angeles, CA · Member since 2018 · 300 posts · 146 votes
6y
Refinance, with cash out if the lender will allow it. Depends on how much equity you have. The lending standards have gotten strict as we are expecting some bumpy waters in CA. Other places on fire.
Real Estate Agent · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
6y
Something that isn't cash flow related directly but study the rental laws for each scenario.
For example, in Los Angeles, a duplex is subject to LA rent control. With a house and ADU, only the house is. This means more flexibility as a landlord. Plus with ADUs, you can generally be better located, which might command higher rents.