Are you doing a streamlined 203k or the larger one? 

I bought a 6-pack of Terro Liquid Ant Bait ($4.68 at Walmart), and took to him with instructions on where to place. 

Then, when we need to upgrade to a larger home, we can use any equity built to fund that purchase.

We are trying to decide if we refinance, sell and 1031 exchange into a larger property.

Lower down payment means larger monthly payment relative to the value of your property and less cashflow from the property, PMI aside.

I've seen posts that use larger funds as an example i.e. 30MM+.

Apart from my personal mistake, was there something larger at play that caused this to happen?

I know that the rule for attached ADUs is that they can not be larger than 50% of the "main house".

Here are some of the downside I can think of: 1) PMI costs, til 20% LTV2) over-leveraged with larger mortgage payment (more difficult to cash flow) 3) no refi until at least 20%3) other?

That's the value of the business component of the sale.In larger companies (roughly $10M+) , there is a different method called EBITDA - earnings before interest, taxes, depreciation and amortization.To that SDE value, we add the value of assets (vehicles, machinery, etc) and real estate, if any is to transact.