Rent is below market rate for the general area.

You should be able to claim the ENTIRE mortgage interest as they let you on primary homes.

I want to cash out refinance and close it under our LLC as DSCR mortgage.

When you sell a property that has been depreciated, the IRS requires you to "recapture" the depreciation deductions, taxing that portion of the gain at ordinary income tax rates.

How much do they want you to to pay, to pay off one of the mortgages (or both of their existing mortgages)? 

There are plenty out there with fair rates and lower fees.

Personally I would want to manage the rental myself at least in the beginning to make sure you get good ratings.

Instead of evicting them, i was thinking is there some way that I could rent it back to him for very cheap (mainly to cover just the taxes/ insurance) ie 2k a year rather than the going rate of 2k a month for similar properties.

I was not comfortable with the market and interest rate conditions, so I elected to hold off.

Those that could afford the huge mortgage bought a primary, built ADU and did STRs or MTRs in S.F.