If you'd like, I'm happy to chat with your friend to potentially inquire about his services as I have a budget set up for 2024 towards external lead gen (Zillow, cold callers like your friend, mailers, etc.) 

The basement is a walkout and based on what I gathered if it has an external exit, this one doesn't have a window just door, it shall be treated as bedroom provided I provide a closet.

Long term average or even recent returns can be a misleading baseline, lots of external reasons that number can be much less than 8% for any given time.

My preference was to have the C-Corp external to the LP and act as the GP.

Was it an external factor like flooding?

Example external storage area conveniently located where it can be converted to a walk in closet as a later time.Part of the exercise is knowing the various regulations. 

What I am trying to understand is, are there any specific permissions required by the County to construct those cottages externally or in the basement?

You cannot force the tenants to follow the guidelines/rules, but you have them to fall back upon when you need to see damages or bring in an external cleaning service.

They will be much harsher. 

I also agree with and advise people to have several escape clauses in the event of something external negatively affecting the business, for sure.