That’s only 3% per year, otherwise known as inflation.

They will use actual rents as evidenced by things like a signed lease, deposited rent checks, etc, provided those actual rents are not wildly inflated relative to appraised market rents.

Due to inflation... check this out to help you find out how inflation will affect you when you retire. https://smartasset.com/investing/inflation-calculator#xzbecwedTm

If they have a good reputation for not over inflating assumptions and have been around through a few cycles, you may be able to get a good feel for how they can perform.  

My friend isn't looking for much of a return for their first investment, they will be happy if we break even or beat inflation with their money sitting in a bank account. 

(and so would the sink).With a SFH and sink already shark bite-ed in, I'd get a plumber estimate to remove it 100% from the site (haul off included) and repair the pipes back to code.Then mark that up 15% for the PITA factor (and inflation) and spread the cost out over the remainder of the lease in equal payments.

So, pull out equity when you can reinvest/re-employ it for at least 2% return (the cost of inflation) - or leave it alone. 

Basically they say when the kids get it they can do whatever I don't care.I don't think it makes sense to own something where you have flat rent for 15 years and that 100k today is now worth 70k with inflation 15 years from now.

Appreciation for new construction single family houses in Houston seem to only keep up with inflation, if at all, especially houses so far outside the loop near the big reservoir that can be released during flash floods.

Don't be that out of state investor that is falling victim to inflated prices and overpaying.