Maybe these are optimal for certain income brackets like sub 100k a year?   

I’m targeting properties that don’t have a need for improvements and are mostly optimized already.

The principle of economies of scale says you will reduce costs and optimize returns if you focus in one area.

We are struggling with determining the layout of the upstairs unit that would allow us to optimize rental income without jeopardizing too many college students with a very small living room.

If you do have all your assets held in Land Trusts already, it's an optimal structure that will integrate into your estate plan for minimal costs.Long-winded reply, but I mostly wanted to share the tid-bit about the financing options available to you.

These are the types of factors I measure when sacrificing optimal cashflow.Best of luck!

Optimal?

I would not worry about the tax consequence of that small amount of money but as we have suggested take this matter to a real estate attorney or professional and licensed tax consultant so you know where you stand and what your legal options are for optimizing your situation. 

It may be easier to rent out the space and collect a rent check, but I would like to optimize my return and increase my property value as much as possible. 

The point is that too many real estate blogs and forums say “never put real estate in an s corp”, but in reality there are plenty of reasons why you would want to use an s corp for optimal asset protection and tax strategy.