I realize you did not write the lease and so you have no control over it, but you are now seeing how decisions in your lease impact you and the tenants during the lease. 

Determine the best you can what size impact on refinance that this would have on your refinancing goals (eg. $20k less, $50k, less etc.) and apply a reasonable rate of return that you would expect to make on that amount of money if you were to refinance.

Dropped out of law school after year 1, because I didn’t want to go into an intense amount of debt and law is not necessarily the way that I desire to make my impact on the world.

When you have a property that only cash flows so much, that has an impact on your return!

That's not investing...that's speculating, and THAT IS impacted by the economy.

Does anyone have general advice or info on how a HELOC might be impacted when it is opened when the market is high, but mostly operates during the down turn?  

I want to understand how these expenses will impact my overall income in 2019, and in the future if some of the costs are going to carry over? 

Tax free income for your primary home so maybe talk to your CPA about how flipping will impact your taxes vs living in it then selling later.

The cost of ADU as I research more is really high due to huge fees like impact fees ranging from $25K to $50K (not known until City verifies all details) plus various other fees like Sewer approval, and various inspection, on top of actual construction cost.

I'm curious to hear what other people say.The guy could have just taken white out to lease and copied it to get what he wants without impacting your original lease with him.This is not much different than asking you to create a lease without his wife on it even though she will still be living there.