(In other words the Section 8 voucher should count towards their income.)   

I'm not really counting on appreciation in any deal but in nicer neighborhoods the appreciation is much more likely and that's icing on the cake.

Could free-and-clear property count as reserves, or as collateral somehow?

You might get lucky and find a lender that does 20%, but don't count on it.You'll have closing costs on the refi.

I find attached Adu is better valued from appraiser since they just counted as extra square footage of the house.

Multiple credit pulls within the same 2 week'ish timeframe is counted as one pull. 

It's our job as the landlord to go over the lease with them in detail, and it sounds like you may not have done that and were counting on him to read it.  

I didn't know, we started listing them and counting and got to over 40, it is actually a pretty big job for having a day job also.

Could I still just finish the basement so that buyers see a "finished" basement, even if the height is not tall enough and the sqft cant not be counted as part of the house? 

I'm trying to think more creatively, like units I can get for cheaper because they're two beds, turn them into three maybe... units that are unlivable and need an upfront influx of cash to upgrade and get higher paying tenants in (though that cash counts against profits too).