Is it a smart idea to use a HELOC to build an ADU on my primary residence?

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Yes

To rent? Sure

Price of unit to build / HELOC interest / expected rent?

Do you want a tenant living on your property?

Then sure. However make sure you are aware of any limitations that would reduce the value. For example I own a rental in a college town and rent by the room. I’m only allowed to have 3 unrelated people living on the property. If I built an ADU, I couldn’t legally rent it because I already have 3 unrelated people living in the primary structure. I would have to restructure how I rent. For example,e I could rent the primary house to a family and rent the ADU to a student. For me that probably doesn’t pay because I make about a 30% premium by renting the house by the room.

Does the governing entity (town, city) where that property is located allow for ADUs? If there is no zoning or land use violations, I would say it is a good investment.

That does not necessarily mean it complies with local laws. What state are you in?

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