@Robert Bowser any indication as to the lender's hesitancy? 

There are RE investors who have been networking for a long time, have the means to close in cash in a short duration, have a record of doing what they indicate, have paid bird dogs on their verbal commitment, have closed on multiple properties.  

This indicates they are likely well below market.

This will indicate how the income/expenses will be reported.In general, you may have to file MS tax returns going forward since you have income/expenses earned within the state.

The receipt they provided does not clearly indicate a refrigerator purchase at all, just an "order id" and "recall amount"; there is no indication of a product type, name, etc.

Since your buddy wants you to provide financing, it indicates that he has little to no resources and poor to no credit.

By the way CA has very lenient ADU rules, but the hands off cost of a garage conversion ADU in my So Csl market is more than double what you indicated.  

Do you have pointers to any websites that indicate the exclusion?

It looks like the BRRRR calculator was used, but you indicated there would be a down payment and loan up front rather than paying cash.

The property is a 2.5k sqft 4 bed, 3.5 bath on 1/2 acre,  comps indicate $1.45m.