It is very hard to do an FHA 3 & 4 unit currently because it has to pass the self sufficiency test and with where rates are at it is unlikely to pass.

Should I be a private lender since rates are so high?

I have a property manager actually do the showings, but any issues like plumber , electrical is a phone call away.The only challenge is it's a commercial loan, which requires more down, higher rates and shorter terms. 

Properties equipped with the latest technologies and sustainable features often command higher prices and rents, enjoy lower vacancy rates, and have reduced operating costs.

If so you definitely  need one.If you or most all of your competition doesn't have one then it's not necessary but it may help set you apart from the competition if you need to increase your occupancy or nightly rate.

The only con is the higher interest rate. 

Does anyone know how true this is and if mortgage rates will keep going up? 

There's a lot of moving parts here but it sounds to me that you owe them at most the original $150k + a conservative 8-10% interest per year (well above market rate).

If it is a normal 70/30 leveraged property, you may end up subject to tax on 70% of your returns anyways - so cost benefit, is that 30% tax free portion worth the high tax rates paid and additional filing fees to get tax free treatment on the 30%?

Agreeing with everyone else - I always look to increase occupancy, not decrease.