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Vol. I ·California ADU Desk ·Licensed · Bonded · Insured ·CSLB #1098432 ·BBB A+ Accredited ·120+ ADUs Delivered ·Starting $250K ·10–16% ROI ·Los Angeles ·Bay Area ·Vol. I ·California ADU Desk ·Licensed · Bonded · Insured ·CSLB #1098432 ·BBB A+ Accredited ·120+ ADUs Delivered ·Starting $250K ·10–16% ROI ·Los Angeles ·Bay Area ·
GoldenStateADU

Finance · 9 min read · March 17, 2026 · 401 words

HELOC, cash-out, renovation loan: the ADU money decision

A practical comparison of the four ways LA homeowners actually pay for an ADU — including the one product (renovation loan) that lets you borrow against the finished value.

Key takeaways

  • HELOC: fast close, variable rate, draws as needed. Best for high-equity owners.
  • Cash-out refi: fixed rate, requires re-underwriting the whole loan. Best when current rate is below market.
  • CHOICERenovation / HomeStyle: borrows against finished value. Best for low-equity owners.

Most LA ADUs cost between $250K and $400K all-in. Cash buyers are rare. Among financed projects, four products dominate: HELOC, cash-out refinance, Freddie Mac CHOICERenovation, and FHA 203(k). Each has a different sweet spot.

HELOC: fast, flexible, variable

A home equity line of credit is the fastest path to capital — typical close in 2–4 weeks. You draw funds as the project hits milestones. Rate is variable, indexed to prime. Best for homeowners who already hold significant equity (40%+ LTV) and don't mind interest-rate risk during the build. The CFPB HELOC explainer is the cleanest reference.

Cash-out refinance

Refinance the primary mortgage at a higher balance and take the difference in cash. Locks in a fixed rate. Math only works if the new rate is at or below the old rate, or the homeowner is OK with a higher monthly payment. With current 30-year rates well above 6%, most LA homeowners with a sub-4% existing mortgage avoid this.

Renovation loans: borrowing against the after-built value

This is the product most homeowners don't know exists. CHOICERenovation (Freddie Mac) and HomeStyle (Fannie Mae) let you finance the purchase or refinance based on the appraised after-built value. The lender funds construction in draws against an appraisal that already accounts for the finished ADU. For a homeowner who only has 10–15% equity, this is the only route to a fully financed ADU.

FHA 203(k)

Backed by HUD, the 203(k) is the FHA cousin of CHOICERenovation. Lower credit-score floor (~580) but adds mortgage insurance and stricter contractor requirements. Typically used by first-time buyers adding an ADU at purchase, not by existing owners.

Side-by-side

  • HELOC: fast close, variable rate, draws as needed. Best for high-equity owners.
  • Cash-out refi: fixed rate, requires re-underwriting the whole loan. Best when current rate is below market.
  • CHOICERenovation / HomeStyle: borrows against finished value. Best for low-equity owners.
  • FHA 203(k): low credit floor, adds MIP. Best for first-time buyers.

Sources

  1. Freddie Mac CHOICERenovation · Freddie Mac
  2. FHA 203(k) Rehabilitation Mortgage · U.S. Department of Housing and Urban Development
  3. CFPB HELOC Guide · Consumer Financial Protection Bureau
  4. IRS Publication 936 — Home Mortgage Interest Deduction · Internal Revenue Service
  5. Fannie Mae HomeStyle Renovation · Fannie Mae

FAQ · Finance

Common questions on finance

The questions readers send us most after this guide.

  1. What kind of return on investment can I expect?
    Across 120+ completed LA projects, our owners see 10–16% annual return on construction cost in long-term rental. The math: a $280K detached ADU renting at $2,800/month grosses $33,600/year — roughly a 12% gross yield before expenses. Property value uplift is typically 1.4–1.7× the build cost on appraisal.
  2. Are there grants or rebates available?
    The CalHFA ADU Grant Program ($40K toward soft costs) was paused in 2023 but a successor is in late-stage legislative drafting. LADWP offers rebates for high-efficiency HVAC and induction cooktops. We track every active program and apply on your behalf.
  3. What does an ADU cost in LA?
    Pricing depends on size, finish level, and site conditions. For 2026, our detached ADUs start around $250K for a 480 sq ft studio and run up to about $450K for a 1,200 sq ft custom build. Garage conversions begin around $145K. JADUs typically run $95K–$140K.
  4. What's included in your turnkey number?
    Architectural and structural design, Title 24 energy compliance, full permit fees and plan check, soils report when required, foundation, framing, MEP rough-in, insulation, drywall, doors, windows, kitchen, bathroom, flooring, paint, fixtures, and final cleaning. Excluded: landscaping beyond grading, solar (offered separately), and LADWP service upgrades when the existing panel can't carry the load.
  5. Will building an ADU raise my property taxes?
    Only the ADU portion is reassessed at its construction cost — the existing main house keeps its Prop 13 basis. On a typical $280K ADU, expect a property tax increase of roughly $2,800/year at LA's 1% rate plus local assessments.

Sources & further reading

  • California Government Code §65852.2 — statewide ADU framework (ministerial review, 60-day clock).
  • LADBS — Accessory Dwelling Unit information bulletins and current permit fee schedule.
  • HCD — California Department of Housing & Community Development, ADU handbook (2024 update).
  • Internal data: 120++ ADU projects delivered across Los Angeles County, 2018–2025.

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