I left a large cash cushion ($65k) to handle this negative flow, as well as any surprises.

Note ADU addition in a MF zoned area may be comped with a duplex but I personally think this is wrong as a SFH with ADU is not a duplex.- it is cheaper to buy a property with an existing ADU than adding one   In addition you would receive RE purchase financing.  

This is not a large operation and I don't want to over complicate things. 

Lastly, our DTI is maxed out per every lender we've spoken to recently as all the properties are mortgaged in our personal name.

You'll want each unit to pay their own bill unless you are planning to implement an MTR/STR strategy in which case occupants tends to not put utilities into your their name and you are charging a much large fee each month.

I don't know much about the Peninsula or South Bay but I have seen some deals in the East Bay in the high $600,000s to $700,000 range.

What happens if one of you decides to buy a personal home and need the credit to qualify for a new loan so needs to sell this one to make it happen, but the other partner not ready to sell yet, or doesn't want the capital gains. 

The total cost of project is more than we can qualify for based on personal income, although our W2 income and credit score all work in our favor.

I would personalize it with a picture of yourself and sign the bottom to make it official.

Yes, Florida does seem to have an unusually large number of con artists and snake oil salesmen.