You have many  options with that property you have, do not ever assume anything (like not doing the kitchen/bath and going STR).You need to figure out what you are comfortable with and what will make you $$.

Buy creative real estate, don't chase the comfort of a nice new house, chase the cashflow opportunities to start.

“Safety comes in numbers”Also, in my opinion you should NEVER invest what your can’t comfortably afford to loose.You are 100% correct about prices increasing over the years.The answer is quite simple.

If I was in your shoes, I would have them be actual partners and guarantee the loan with you.

I think it depends on how comfortable you want your tenants to be, but me personally I wouldn't add it.

Just get yourself in the game and own the roof over your head with a monthly mortgage you can afford comfortably, anything beyond that rent the other rooms out if there are any.

If you refi to a renovation loan by including the ADU costs + paying off the existing mortgage, would your total monthly payment be financially comfortable and agreeable to you? 

Then go through the numbers and see if there is enough potential profit for you to be comfortable with the deal. 

I’m personally more comfortable with SFR or a 4 plex vs a 50+ multi family. 

Hi Alex,It could depend on your experience - if you have a lot of experience in heavy rehab/construction you will (1) be qualified for the loan as construction loans require substantial experience and (2) feel more comfortable taking on the loan.