Los Angeles Post ADU Build BRRRR Strategy: How to Get Cash Out
Hello BRRRR aficionados!
After purchasing an SFR in Los Angeles in 2020 and renting out the main home to tenants, I'm close to finishing up building a new detached ADU in the rear as well, complete with a private entry and backyard for another set of tenants. The ADU (with a separate address) adds about 700sqft (2BR/2BA) to the existing 1100sqft (3BR/2BA) main home, with the additional sqft and bed/bath count showing up on the property's title report.
The question now: How do I maximize how much $$$ I can pull out of this property so that I can do this again? I've been told that a cash-out refi is probably the easiest way to go, but here's my open questions for the community:
- Maximizing Equity to Pull Out: How do I maximize the appraisal value of property, given that it's now much more square footage, bed/bath count, and rental income potential?
- Refi Options: Is a cash-out refi, HELOC, or other method to pull out the newly built up equity the way to go?
- Loan Limits: How do I get around the CA jumbo loan provision, which prevents how much I can pull out at the current rate? I had looked into cash-out refi-ing before, but ran into the ~548k maximum loan as a blocker (which in hindsight is puzzling, because it looks like the LA county jumbo loan threshold is ~822k)
- BONUS: What would you do in my shoes?
Thank you for your help and advice!