I've heard of people making it work out here so I believe you, but just trying to wrap my head around how. 

I have a third that I am hoping will work out.  

It will work out for you if you manage everything well.

Still need to work out the LLC issue for the trust, but excited to be getting some positive cash flow now!

If you were going to live someplace for 10 years - i would definitely recommend a 20 versus 30 year loan - but if you're going to move out after its fixed up and rent it - then you will need to decide your own financial preferences but maybe the longer term 30 year loan and lower monthly payments work out better for you.          

A good broker will ensure your borrower is qualified, the house is a good deal, the paperwork is bulletproof, and that you know what you’re getting into.Brokers are a valuable second set of eyes you’ll always want to use if you can, but no assurance the loan will work out.

He's looking at it for tax relief as well as being able to use it for personal use (he LOVES Maui) and it would be a short term rental property to cover costs but I want to make sure the numbers work out so that this doesn't end up sinking his retirement ship.

If the numbers work out to build this instead of just the garage, he gets the "nice to have" factor of the garage while adding real value in the living space above. 

DIY as much as you can and save up to contract work out.

Then it is whatever equity split you can work out - 50/50, 40/60, 30/70, and then split cash distributions.