Joint Venture: Downsizing Strategy
Downsize Smart Without Moving Twice: Use Your Home Equity to Build a New DADU Before You Sell
There comes a moment when the home you’ve lived in for years becomes more burden than comfort — aging systems, costly repairs, and the anxiety of what comes next. Yet that same home holds the equity that funds your future. This strategy offers a graceful transition: move once into a brand new, energy efficient DADU with Triple S (Sockeye Special Services) support, then unlock the value of the old home when you’re ready. And because no buyer wants construction happening after they move in, building the DADU first ensures a clean, respectful handoff — and a confident step into your next chapter.
Brad and Heather purchased their main home 12 years ago for $550,000. They still owe $350,000 on their mortgage and carry a $150,000 HELOC balance. SkyDADU builds a Deschutes-1 for a total project cost of $470,000, and the main house sells for $950,000. The sales proceeds are first used to pay selling costs, closing costs, and existing debt, with the remainder applied to the DADU project. The balance is then converted into a new 30-year mortgage at 6.3%.
Moved Into DADU
Sell Main House: $950K
Sales Cost (6%): –$57,000
Closing (2.3%): –$21,850
Net: $871,150
Pay Off Debts
HELOC: –$150,000
Total Payoff: –$500,000
Sale Proceeds
Net Sale: $871,150
Less Debts: –$500,000
Remaining: $371,150
Finance Balance
Project Obligation: $481,089
Less Balance: –$371,150
New Mortgage: $109,939
DADU Appraisal: $800K
BEFORE
Mortgage (3%, 30 year) excludes taxes and insurance: $1,475.61
HELOC (9.5%, interest only): $1,187.50
Total Before: $2,663.11
AFTER
One new mortgage (6.3%, 30 year): $680.49
Monthly Savings: $1,982.62
Capital Gains Tax = $0
How? – It’s the LAND!
JV 100% Financing Interest (8%): +$11,089
Total Project Obligation: $481,089
Less: Sales Proceeds: –$371,150
New Mortgage Amount: $109,939
Instant Equity = $690,061
Why this works: In this example, Brad and Heather move from two existing debt obligations into one new mortgage, reduce their estimated monthly payment by about $2,000, and end up with a newly built home that is appraised at $800,000. Because the sale of the original home may also allow them to use up to $500,000 of homestead capital gains exclusion, the strategy can create both lifestyle and tax-planning advantages, subject to the client’s tax and legal advisors.
Disclaimer: All numbers shown above are illustrative estimates for marketing and educational use only. Mortgage payments are estimated using standard fixed-rate amortization assumptions for 30 years and exclude taxes, insurance, HOA dues, maintenance, and utility costs. HELOC payments are shown as interest-only estimates. Construction-phase financing carry is estimated using equal monthly draws over a six-month period at an 8% annual rate compounded monthly on funds advanced. Actual pricing, appraised values, financing terms, taxes, timelines, and closing expenses will vary. Any capital gains treatment, homestead exclusion eligibility, ownership structure, and legal or tax outcome should be reviewed with the client’s CPA, attorney, lender, and escrow professionals before decisions are made.
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Turn Home Equity Into Your Next Home: Build a DADU First and Sell When You’re Ready
Discover how SkyDADU’s Joint Venture program can help you downsize, age in place, preserve home equity, and transition into a brand-new Detached Accessory Dwelling Unit (DADU) without selling first. Schedule a no-obligation consultation to explore your property’s potential and see if a DADU transition strategy is right for you.
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