If your "small Multi" is a 5 unit or higher disregard everything I've written here LOL!

Will they base their calculations solely on the income from the two legal units and disregard the non-conforming basement?

If entities are disregarded, you can keep up with more than 1 in a single QBO account using the location/business feature to keep track of them separately.

This would appear a blatant disregard for disclosing to would be Investors information that would have been needed to make an informed investment decision.Perhaps you already have this YouTube video.

Do you suggest file 1065 or be treated as disregarded entity on schedule E. 

If you are based in California or operating an LLC in California you will be required to file an LLC regardless of whether or not it is considered a "Disregarded entity" by the IRS for Federal tax purposes.

LLC-A is a disregarded entity for tax purposes and I report the rental income/expense on Sch-E. 

This specific tenant disregards quiet hours and continues to play their music loud.

Either way, you definitely don't want to keep a tenant who blatantly disregards your rules or leases.

It sounds like your LLC is a disregarded entity.