Illegal basement units seem to be very common in this area.

You are suffering from a common misunderstanding of the law.

The most commonly listed minimum is 5.5sqft.6 - Heating and Cooling element.

I highlighted two common exceptions in my earlier post, but doesn't sound like either scenario applies to your case. 

As in the common rent for properties of the same size that you can put a box around on a map. 

Pretty common for the area to do work like this

Being the experienced PM that you are and professionally screen your tenants on your future rbr HH, I think that you will be able to debunk (not sure if that is a word) all of the common rbr misconceptions.When Acorn decides to take on rbr pm, lets connect!

https://www.biggerpockets.com/...12 Frequently Asked Questions (And Answers) About DSCR Loanshttps://www.biggerpockets.com/...8 More Commonly Asked Questions and Answers to DSCR Loanshttps://www.biggerpockets.com/blog/eight-questions-and-answe...What Documents Do You Need for a DSCR Loan?

When converting common living areas into additional bedrooms, many DSCR lenders might view the property as non-conforming, which could pose challenges.

There is no given answer here, because the whole property needs to be relatively consistent.Kitchens and baths are the common answer, but if they are passable and you choose to invest in them anyways at the expense of peeling paint (or off putting exterior color) and overgrown landscaping, the appraiser and tenant will be walking up with a bad taste in their mouth, thereby not valuing the interior work you have done.But think about the general flow of someone looking to rent: more bedrooms will typically dictate more rent.