For context when we do this our biweekly payments have been around $485 per paycheck so around $1,000 per month of lost income per person when we both do it. 

I'd estimate your cash flow after you pay the loan payment would be $600-$800, which a lender that understands investment real estate should give you some credit for on your DTI.As for a bank, I have a specific lender at NBI that I would recommend.

The idea of debt-free is that if a person is going to retire and has to completely depend on the income, they don't want a severe recession surprising them and causing them to default on the debt and losing the properties.In a normal world, I would do that as well.

Then I have still have to pay the person who was acting as a host even though no one came. 

I was sent an offering memo by a broker selling a multi-family building in an area no reasonable person would even consider affordable housing material yet the marketing materials made a point of emphasis to detail how the property would satisfy the need for affordable housing.

.: I'd be tempted into doing an STR (maybe with a higher down payment to ensure cashflow, just run ROI numbers) or an apartment complex - I personally wouldn't mess w/ small stuff.

Cash flow is constantly promoted and pushed, and often, the personalities lack long-term experience, so they can't talk about the best reasons we should be investing.  

If the property were owner-occupied, would I only receive credit for one rental unit's income, while the non-conforming basement income wouldn't count?

You will quickly find, as you generate local person-to-person relationships, how many opportunities open up! 

Where buyers/tenants can view dozens of properties in a day to screen out less desirables then schedule with a real agent to see the home in person!