Avoid PMI and then go to a local credit union and get a heloc after closing to gift the money back.Have this as a tool in your tool belt but pursue use of the 3.5% FHA, knowing that you will be at a competitive disadvantage if you are competing with non FHA buyers, then you can call in the favor from your gift person.Just know that if someone gifts you down payment money, your bank will require them to sign a letter stating that it is in fact a gift that doesn’t need to be paid back.

For a flip, I assume I would pay off the HELOC once I flip?  

Whey are you looking into a HELOC a month before closing on your first property? 

Make sure you know the value the ADU will add to the property before building the ADU. 2) the financing on an ADU is typically far worse than for initial investment property acquisition or is often not leveraged by the ADU (HELOC, cash out refi, etc).

Alternatively, your sibling might use a 1031 exchange to defer taxes by reinvesting in like-kind properties, though this doesn't directly fund a primary residence.Other ideas include leveraging a HELOC on the rental properties for the down payment, taking out a 401(k) loan, structuring an owner-financed agreement, or a lease-to-own arrangement.

Make sure you know the value the ADU will add to the property before building the ADU. 2) the financing on an ADU is typically far worse than for initial investment property acquisition or is often not leveraged (HELOC, cash out refi, etc).

Given your mortgage situation I would opt for taking out a HELOC.

If I were you keeping the property as 4 units and renting out bonus unit under the radar may be your best option especially if you plan to refi or do HELOC while occupying. 

If it's in an area with high appreciation I would try to extract the equity via a HELOC or cash out first.

I've explored refi and heloc, but came up empty as I have no chance of qualifying income.