This wouldn't be mortgage fraud (because you are living in the property), and you are able to make some revenue from the tenants, or am I missing something here? 

Quote from @Matt Weddon: Really what generated this question was a section from Brandon and Heather Turner's Management Book, which has been incredibly informative and helpful.

Or a property where you could leave for a month in the summer, for example, and make 10-15k in STR revenue?

If you don't mind a little more management, renting by the room and midterm can bring in a lot more revenue than renting just the basement or other unit if you get a duplex. 

(Feels that way to me) I've been really using Cl / BP and others to post ads to generate traffic to my siteTY in advance, all are welcome to respond.P.S.

During this time you are not generating any return from the money invested in the ADU.

Sure enough the rehab ran over budget (we had a large contingency that was used up -- some due to contractor malfeasance, some due to pulling the trigger on big repairs like a new roof) and the revenues were right around expectations, maybe slightly below.  

Once that extra rental started generating income, he realized the higher interest rate was just a temporary hiccup on the way to bigger returns.In your case, maybe look at a structure that keeps your best cash-flow property on a lighter refi (say 50% or 60% LTV) while you go a bit heavier on the one that’s not producing as much right now.

Unfortunately there's a lot of alarmist/scare tactics utilized to upsell these services that do nothing but generate revenues for those who are selling the service and often leave the clients with recurring expenditures i.e  annual maintenance costs.  

But maybe your tenant reaching out and mentioning that they're going to be forced to file a police report for fraud could generate some traction...obviously the real objective here is to just get the seller to call you back...