They are great and they sport a 1% eviction rate and they carried that even through the pandemic. 

You would end up saving the higher interest rate on the HELOC as well as closing costs.

If any short term financing, risk adjust upwards another 2% points on the interest rate.3.  

No - absolute max for DSCR is 85% LTV and that is extremely rare and typically not workable in this rate environment anyways.Standard/common max is 80% (acquisition and rate-term refinances) and 75% Cash-Out Refis

Typically, the adjustments I see on appraisals for basements are more flat rate adjustments. 10k is usually the number I've seen.What stinks is that there are a couple of model types that have below grade space where the builder, I'm sure, was trying to lower the taxes by having it below grade so the county wouldn't count that space in the assessment.

Just make sure you’re comfortable with the interest rate if going either route.  

million in addition to their investors (who expect a reasonable rate of return) by keeping the rental rates at a fraction of the market rate?

However, other factors will matter, and the rates of taxation are different for different components of this Step 3 result.

Quote from @John Warren: @Mordechai Chaimovitz cap rates and NOI are commercial real estate terms, and 1-4 units are not really valued in the same way.

What is the compelling reason for them to pick you, with your competitive rates, over someone else they've already been using with competitive rates?