Adding a bathroom can add more value.

However, if he does not accept, I think I can rent for $1600, however I would have to convert into an apartment layout, bathroom, kitchen, etc.

This is important because the discounted property tax is likely the only advantage of keeping it and that is only present if you move in.  

I'm trying to do BRRRR on this unit by renovating the whole bathroom, kitchen and etc.. but not sure how much it would appreciate as it's a basement unit but it has 5 bed 2 bath...

The bathroom ceilings were so low that I may not even fit in the shower.

.- While MTRs can be any size property, the bedroom/bathroom count is really important, especially with larger properties.

Then, possibly you can outsource some responsibilities to a lead tenant in exchange for discounted rent?

For example, a hot water heater is ready to go versus a bathroom you want to upgrade.

Just my opinion.Bethesda’s Clark Building Sells For $30M, 22% Of Its 2019 Price (bisnow.com)West Loop Landmark In Shadow Of Willis Tower Sells For Nearly 90% Discount (bisnow.com)Blackstone’s Defaulted NYC Office Loan for Sale at 50% Discount - Bloomberg

We added a full bathroom in another bathroom to create 2 master suites.