Good morning Jen, Were you guys ever able to find a lender who could pull this off?

Note, even if you assume a VA loan, it still remains under the seller's VA certificate until the loan is paid off.

The challenge that many borrowers run into when looking for larger equity lines with limits  of $250k+ is that they typically require full income verification (not always bank statement and DSCR exist) with lower DTI ratios (43-50%) however although the repayment scheduled is based off a simple interest only payment, (usually a 30 year amortization schedule with the initial draw period of 5-10 years) the qualifying rate is based off of the converted twenty year amortization schedule (240 equal installments) of the payback period.

This remodel If hands off looks to me like $30k effort.  

Whatever you lose in a turnover will be made back pretty quickly once you get a tenant in there that takes that utility burden off your hands.

I am doing this because this is not the only property I intend to buy so I thought I should start off with an LLC now.

They are typically the opposite of value adds in that they typically have a hands off cost more than the value added.Your broker is correct that Fannie/Freddie are not to use the rent from the ADU. 

I don't have the remaining 30k to pay off the mortgage. 

Welcome @Sartaj Ghai,Sounds like you are off to a good start and have the right long term mentality to go far with this!

If at least one of you can't do that, I wouldn’t do anything more than rethink this as a one-off project.