A HELOC offers flexibility and lower interest rates, which can be ideal if you’re looking for short-term financing with lower payments during construction.

My goal is to diversify with an investment that generates steady cash flow, even if it requires a larger upfront investment and lower overall returns. 

and 5 years is a long window for things to change in ways we don't expect (lower interest rates maybe??).

Can you do the lease renewal, but have lower rent for the first month and then increase it the second month (if that fits with 60 days' notice)? 

It is often much lower than rent O meter because rent O meter is pulling data from the advertised price, not the rented price.

But at a lower rate compared to other cities that are growing. 

This helped our CPA know exactly what transactions related to the house.

Our strongest case is that our bank appraisal says it should be much lower.

So the lower the interest rate on the subject to loan, and the higher the prevailing rate, the more chance that a lender will initiate action.   

Presumably, if you retire before you take Social Security, you will have a handful of low income years when you could then do Partial Roth conversions and convert those assets you presumably saved at a 22% or higher tax rate, and convert them in a lower income situation (12% or less).