I figured I would use HM for the purchase and DADU build.

Keep existing building ($850K appraisal) and build an DADU 2.

I would fix up the garage and live in it myself (DADU) and rent out the house.

Having watched many prior co-workers get paid, cash their check at the casino, and promptly deposit it all into a slot machine I can tell you with pretty good certainty that casinos don't have a positive effect on disposable income and good use of the existing income in the area surrounding :)Are there solid local employers OTHER than the casino in a 15-minute drive? 

I'm considering converting the shed into a DADU to maximize the use of the space and earn some extra income. 

I have a DADU over my detached garage that my daughter used to live in, but now she is out on her own so if I want to do a more major renovation (need to refinish the floors and maybe open up the kitchen more), I can move into the DADU as well.

I own my primary residence and want to build a DADU on the back of the lot.

We moved it to a 1 night minimum because we were having trouble filling weekend slots, which was rare for our listing.

Furnishings cast slotted for the property." - If you get creative on this maybe it's enough to the make the numbers work. 

Who was the builder of your DADU?