Borrowing against your paid off house without an income puts way too much pressure on the success of whatever deal/project you decide to pursue. 

As others have said, the best thing your son can do is run far from this deal, buckle down, save his pennies (he probably already is doing this), house-hack, and improve a property with sweat, hard work, developing a DIY skillset, and self-managing tenants. 

These cash outs got me 14 houses with no out of pocket $.

I have done some research on ADUs and have come to conclusion that getting a house near a hospital or good college area with a big yard to add an adu and convert gargae to junior adu would be best.

Zoning Ordinance ExceptionsSome properties in the target zone don’t meet the minimum lot area or width size requirements under the zoning ordinance, yet houses exist on smaller-sized neighbor lots.How could these properties get approval for development?

Have you made a research on house prices, rehab costs, time on the market to sell and etc?

A three bedroom house for 800/mo is crazy low!

I think you're in the right are for investment affordable housing .

Are they really any more customizable than a stick built house?   

The first house that I bought was 17 years old, 3 br, 1.5 bath, brick ranch house with hardwood floors, Andersen windows, ceramic tile baths, gas heat and a brand new roof.