You must report rental income on Schedule E and can deduct rental expenses like repairs, maintenance, property taxes, mortgage interest (allocated between personal and rental use), and depreciation for the rented portion.

If the property requires rehab, the Realtor and/ or Mortgage Broker will suggest applying, for a FHA 203k Loan.

I would pay them whatever the sale of my property yields, minus any taxes incurred due to not taking a mortgage out.

You would want to look for an owner that has a loan through a bank or credit union or one that has no mortgage. 

I do not understand your remark as related to the DSCR loan.  2 ADUs are not allowed by f/f conventional financing but is not always enforced.Fortunately if you stay with the current tenant without a refi, by the time you pay principle it is likely the rent will have increased enough to absorb the increase mortgage payment. 

If your rent ends up being comparable to your current mortgage, it might not give you the cash flow flexibility you’re hoping for.

Current rents are at $900 each unit =1800 once we refinance to a mortgage the mortgage will be from 2400-2500 total.

I am going to finish the rehab and get it rented then resubmit for a rental loan.I have used Cashcall Mortgage twice and have been very happy with them but Elite seems to be more flexible and have more options so was going to see if they are competitive.

In my area conveted garages are highly desirable by buyers because they know it can pay for more than half their mortgage. 

The president has zero impact on underwriting guidelines and  zero direct control of interest rates. in fact the fed has no direct control of long term rates that effect mortgage rates.