@Victor YangWhy are you not reaching out to a NC real estate attorney to draw up a document that spells out the agreement that you are looking to do with the tenant?

The bank will put a hold on them, so you can't just draw them out, so don't plan to need them for a while.This will cost you an appraisal on both properties to be performed by that lender. 

Here's the bigger lesson I learned: If a tenant asks for special considerations, or reduction of fees - those are ALWAYS the ones who are the problem tenants.  

I’m looking to access some of the equity in the home to buy out my ex-partner, and my goal is to either convert the house into a multifamily property or add a dwelling unit (ADU).I’d love to hear any advice from the community on the best way to approach this, particularly in terms of financing options, legal considerations, or any similar projects you've completed.

That said, I do this with a a few investors on rentals since I'm a Realtor and Property Manager where I am boots on the ground for purchase, rehab and lease-up, however we had a strong professional experience/life together before partnering.Lending will also be a consideration as most lenders are hesitant to lend to non-citizens given the foreclosure challenges it can pose.

When that portion was complete, I could then receive draw money which allowed me to pay my utilities, taxes, and mortgages.

As you start you will want to take into consideration that many owners and hosts use more than just AirBNb to host their properties.  

That can be a draw back if the market is on a mad run up tho.Also, I would always have enough in a heloc to cover your 401k loan in the event of job loss or if you quit your job. 

Do it ASAP.Exit strategy considerations: Is it worth absorbing some of the costs and focusing on long-term appreciation?

My guess solely looking at your numbers is that it's an older/distressed property which means you have to account for more costs in capex. 2nd thought being it's not in the best of neighborhood then you'd have to take into consideration lower quality tenants/ neighbors and maybe increase expected vacancy and late payments.