I am seeing a trend in CA that ADU construction is more cost effective (per unit) than buying on the market by a long shot.

If operating costs increase, then customers/tenants will eat the costs in tight markets.

He's changing the terms of the agreement, and you can choose to accept it or reject it.I don't think it's fair to pass this cost onto the tenant just because you are unwilling to stand up to the contractor.

The CF is only playing catchup to the cost to you of the property. 

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My total cost is 40k, can resell at around $130.

I'm looking at monthly cost to seller vs. anticipated rental income, purchase price relevant to the ARV of the area and interest rate, balloon, etc.

Here is an example of what it costs you to avoid professional advice.

Low cost, possibly yes, but also possibly very time consuming and that has a cost.  

Over estimate the costs and not need them?