Since companies have a limited lifespan (10–18 years on average), cities must attract new businesses to maintain job opportunities.Factors Companies Consider:Low Operating Costs: States with lower property taxes and insurance costs.Low Crime Rates: High-crime cities deter businesses and tenants alike.Natural Disaster Risks: Avoid areas prone to disasters, as recovery can take years, impacting your rental income.City Size and InfrastructureFocus on cities with metro populations over 1 million.

Reason is a Heloc generally carries a higher rate on a shorter term and "Can Never" be used as an "Asset, or for PITI reserves" which are both required when you buy an investment property. 

In your case, changing the property from a rental to your primary residence constitutes a change in use.The depreciation recapture will be calculated based on the fair market value of the building at the time of conversion, not including the land value.Since you're tearing down the existing structure, the entire amount of depreciation taken over the past two years will likely be recaptured, as the building's value at conversion will effectively be zero.The recaptured amount will be taxed as ordinary income, up to a maximum rate of 25% for residential rental property (Section 1250 property).

Quote from @John Warren: @Mordechai Chaimovitz cap rates and NOI are commercial real estate terms, and 1-4 units are not really valued in the same way.

especially now with rates up.

Just make sure you’re comfortable with the interest rate if going either route.  

We do want to settle in a little bit here while continuing to do our homework, but hope to get into something in the next 6-12 months.With the way interest rates are looking now and what little I see on public listings, I think a smaller multi-family that needs a little rehab would be the best bet. 

And it doesn't seem to spoil the charm for couples on a romantic getaway.We've been able to raise the nightly rate 2-3x with better occupancy. 

It's a finance institute of one form or fashion, they will use it if it's in there best interest, and that means the person who holds the button to drop that ax.

So this is creating more competition and more agreesive rent rates and/or concessions like 1 month free to get those vacancies filled.