Yeah when I was considering my own backyard, I was trying to avoid cities that required relocation assistance, and other weird laws.

Are we required to pay FICA tax on the deferred income? 

The only item I would suggest is double check the payment terms of the your HELOC... in particular, can you pay interest only or are you required to pay a portion of principle each month on the amount utilized.

Banks so far have required me to come in person to open account. 

I recently completed one on a multifamily property and found it to be a cost-effective approach.That said, there are a couple of additional factors to consider beyond the code differences between a garage conversion and new construction:Coastal Overlay Zones – If your property is in a coastal overlay, building a ground-up ADU may require Coastal Commission review, which can add time and complexity to the process.

Know the rules of the sale, some sales wipe out liens, some do NOT, some require only cash payments, others won't accept cash, personal checks or business checks, some require pre-registration, some require that the bidder can't owe delinquent taxes on any property, some vet the bidders for state and Federal liens,.....2. 

Department of Housing and Urban Development (HUD) and Bankrate, the big perks of an FHA home loan are:Lower Down Payments: They typically require a smaller down payment than conventional loans, sometimes as low as 3.5% of the home’s purchase price.Lower Credit Score Requirements: They’re designed to help buyers with credit scores that might not qualify for conventional financing.

Yes you partner with them on the individual deal but you get the reps in to become better at watching a deal from start to finish. 

I think some BD/RIA will discount that fee for the individual investor (like me).

And this might indeed require some time to pass before doing that.You could still create a single member LLC with either you or your wife as member.