About a year ago I bought a small craftsman bungalow in a hot neighborhood in Portland, Oregon. It's my principal residence and I plan to stay for several years. The unfinished basement was a big part of the house's appeal for me, because I saw the potential for an apartment. Thanks to the improvements I've made to the house since buying it and the continued appreciation, I was able to open a HELOC for $90k. This will more than cover the cost of building a nice 700 sq. ft. apartment (with new windows and entry, full kitchen and bath, separate utilities, etc.). Construction costs are high in Portland, but so are rents. I would price the apartment at about $1300/month.
It would cost me about $300/month to service the HELOC, which means the apartment would cash-flow about $1000/month before other expenses. Not sure if I would try to aggressively pay off the HELOC or just refinance the house. Probably the latter.
It's not easy for a real estate novice like me to make cash-flowing investments in Portland, so this is definitely one way to do that. It would be an easy apartment to manage. I could even do some short-term/airbnb experiments with it. And yet, I hesitate to pull the trigger because I wonder what else I could do with that $90K. For example, I could buy another small SFH, fix it up a bit, and keep it as a rental. In that case I would be servicing the mortgage as well as the HELOC I used for the down payment and rehab, so any cash flow would probably be minimal. But owning a SFH in Portland certainly has other advantages. I've also thought a lot about investing out of state and am very intrigued by the idea.
I guess it comes down to my goals. I already have one SFH rental and it's doing well for me. I like the idea of creating cash flow sooner rather than later, as I'm hoping to transition to flexible/part-time work in about 5 years.
Thoughts? Anyone been in a similar situation?