I got a call a couple of weeks ago from a friend who I had not spoken with in a while. He was into a project and called for advice.
Three years ago we helped him purchase a home in the Arbor Lodge neighborhood for around $270,000. He recently re-financed and learned from his appraisal that his home has appreciated by at least $100,000. Now he wants to invest this equity into an ADU (Accessory Dwelling Unit) in his back yard that he can rent out. He asked what I thought, so I crunched some numbers. By my calculations, he'll be able to collect enough rent to cover his entire PITI (principal, interest, taxes, and insurance) payment each month--enabling him to live for free! Pretty good use for his home equity, wouldn't you say?