In fact some of them require the loan to be in the name of an LLC. 

Without even asking for something in return, they may take care of you.

Increasing the prime adjustment five fold and "artificially" raising the rate (especially knowing that your intent is to grow the account by doing so) would likely expose you to some risk in the event of an audit.

I guess just be careful because your licensed your expected to on some level to act as impartial.

Be careful. 

Part of our california broker rules is that we are not allowed to discuss pricing, but I can give my recommendation to have a very detailed mgmt agreement in place with your owners  who takes care of Insurance payments, claims, repairs, tenant issues, HOA violations,  When do you pay the owners> Do you keep a reserve from them to pay for repairs?

Clean it up, rent it at market rate, and pat yourself for making a "business" decision instead of an emotional one.

We are researching this item.3.He stated that he was prepared to take whatever legal impacts this might cause him in order to take care of his family.I politely ended the conversation with a few statements about how I was going to have a weed company come out and spray the lawn, and left.I thoroughly reviewed the lease again.

Also, security deposits should be handled very carefully (not co-mingled with personal accounts)-so this could be a reason why they want to hold on to it?  

But whoever rents it out isn't going to take care of the house the way you would.