This is just my opinion, I haven't invested in a larger multi-unit yet.

I want to get into larger deals because my main goal is cashflow, which obviously isn't possible with this deal.

Month to month gives flexibility (for them and me) and much may depend on your larger strategy, scale, and market. 

When you get larger to reach your goal eventually you are going to have to either take over full time (so much for retirement), or hire someone (PM).

I also expect larger groups to be messier than smaller ones.  

Is it worth it to make the bathroom larger since it would become a 3 bedroom?

The last several years we have had appreciation, in many markets this has been slowing down.For the people looking at larger deals - it will be about remaining conservative as you have but also making sure you test your numbers. 

One week before the closing we all realized there was no way that we could have moved forward with the transaction because it was too risky.We had no choice but to go back to the seller and renegotiate the purchase price.

Every persons tax situation is different, but is there some kind of rule of thumb to determine when the extra cost of CPAs are outweighed by the savings of a larger tax return?

And in general, it's better to work with smaller wholesalers than larger ones.