I do agree that operating costs (insurance rates) will not go down and may even increase over time.

I focused on adding modern luxury amenities to increase the property’s appeal to the high-end market.

These tend to attract more reliable tenants, and the properties generally require less maintenance.

got out of flipping to new construction in our market in columbus ohio. licensed general contractor. when interest rates got high single family existing went down by 30% new builds sold at a 6% increase that year which demonstrated the desire and premium that new construction commands. never looking back. total control, rinse and repeat. we can get permits in 28 days. we can buy land cash in 21 days. we can build in 120 days to 140 days and keep moving. super scalable and easy and no risk. we build the same 2-3 Floorplans 

Increase income, decrease DTI, and buy a home (i.e., get a higher paying job, work two jobs, go to trade school, get a higher paying degree, live in affordable area, etc...these are things that most of us did).

ADU increase value less than the hands off ADU addition, but a developer is not a hands off ADU addition.Thanks

If dipping into your emergency fund makes you uneasy, you might consider waiting a bit longer to build it up or look for ways to increase your cash flow on the current property.

Build your portfolio as your knowledge and wealth increase. 

That will increase your material costs for the job and is the contractor paying for the material in their bid or are you paying for it and paying them a labor cost.

My guess solely looking at your numbers is that it's an older/distressed property which means you have to account for more costs in capex. 2nd thought being it's not in the best of neighborhood then you'd have to take into consideration lower quality tenants/ neighbors and maybe increase expected vacancy and late payments.