3 yr old with underarm rash?
Detergent may be to harsh as well as lotions, soaps and powders. Try putting vitamin E oil on skin rashes. Worked wonders for my babies years ago. You may want to consider getting more natural baby products from the health food stores.
could be anything including bed bugs or a spider bite ? i would go have it looked in the morning to be on the safe side .
Might be the clothing they are wearing. Might want to get it checked.