Assume a good quality $375k 2bd/1or2bth duplex 4.75% rate, 20% down, $5k closing costs (assume $60k of needed $80 will come from father technically), no initial repairs needed.

My view is that people are a big part of a business, and that affordability and quality of life for employees (as opposed to convenience for the CEO) may be the parameter that tips the scales. 

-you don’t have to pay interest on a large fixed sum of money until you find or are ready to pull the trigger on a deal-it allows you lock in some or all of the amount at a fixed rate so your protected against rising interest rates ( given the current market conditions I believe we will see a couple more increases from the Fed this year which will increase borrowing costs for any variable rate products)- See this attached article that does a good job of simplifying it https://www.investopedia.com/mortgage/heloc/fixed-rate-option/

If you are looking for more appreciation, better quality tenant, and are ok with the thing just floating itself until you can pay down the mortgage and realize the appreciation, then I would go PA. 

What type loan product are you using? 

The amount of coverage is not as important the quality of coverage. 

Accent the healing qualities of the water if people still believe that... 

My Property Manager tells me that 3 bedroom units are actually more difficult to rent out (in this area) and the tenant quality will be worse.

I can rationalize that clients make their own beds and that I am acting ethically but if I know the odds are against them and I offer the product anyway... that's seems unethical despite being perfectly ethical.

For me, it depends on the scope of non-permitted work, and the apparent quality of the work.If it's an addition, adding square footage, I can see it being an issue come taxes/appraisals/etc.