My mortgage would go up $781 for the next 30years,  the ADU income would more than cover & I hope to pay extra principal to cut my loan time -it's just I was hoping to pay off ADU within 5.5yrs- so that I can collect 'all' ADU income at that point <I'm fixed income & I lose 'some' personal income in 5yrs so trying to plan ahead on how to recoup that>.

It's lose-lose for those that own the condos.  

NOTE 2: if we choose NOT to upgrade the rooms, the units can't be in the hotel's pool of units to be rented out to guests.NOTE 3: right now, I'm losing about $1,500/moMy gut tells me to just get rid of this unit at a loss but I have a few questions I'm hoping someone can help me with (so far, I've asked some RE professionals I know but they don't have any idea).1) If I was to pay the ~160k for room renovations, does this mean the room increases value by at least that same amount? 

Because you're going to lose one tenant due to the actions of another tenant. 

It may take several months to find a deal in either location, so you've got nothing to lose but time, yet a lot of experience will be gained.

So, I am staying away from suggesting that, otherwise I will lose the friendship. 

They are undoubtedly losing money, how are you going to turn this around?

This shows your intent to purchase and protects the wholesaler should you get cold feet and they're stuck losing their front-side earnest money, or heaven forbid, actually close on the property.  

CalifCalifornia is so tennant friendly that I lose control of an asset that I purchasedIf I'm going to rent it the lease agreement wasn't of my doing.If I'm flipping to sell (my primary focus) there's someone living in my construction site.Bottom line, I'm buying a house, not a Tennant, squatter or whatever.

Bear Market (or correction): many, many are going to lose money.