Do you have to combine them to get larger units? 

I am now considering purchasing a larger single family and using conventional financing, and renting by room to accomplish the same goal.

I guess they can always ask for a larger down payment, right?

Look at Local Credit Unions if larger banks arent working out2.

I'm currently sitting on 3 doors and out of liquid.

Nail holes are usually considered wear and tear and to be expected but larger holes are not.

What about if we demolished the detached garage and constructed a new (larger) garage?

We intend to create a property management company when our rental portfolio gets larger to support our assets and offer the same services to smaller landlords for a fee. 

This is a form of rental arbitrage and is talked about here from time to time but it is usually where the renter is putting it on air b&b where the spread will be larger than with long term but there is also more work involved.  

You make a good point as financing might be larger than I expected with developing costs.