Emphasize Walkability and Transit AccessProperties near CTA train lines or buses rent faster.

I like this train of thought and think you should aim for option 3: conventional loan + lower downpayment (perhaps even lower than 10%).

But to start with MF that seems like a pretty heavy lift for these folks.Of course you can teach theory but then you have real estate reality..  

Look up the courses taught by Justin Kivel, specifically the Pro forma modeling course and the real estate financial modeling boot camp.

We feel this encourages/trains good payment behavior:)We have several MoveIn Specials owners can approve like, free TV, Washer or Dryer (used), etc.Our main goal with MoveIn Specials is to stand out from our competition. - Just lowering the rent really doesn't do that.

What is the best course of action? 

If there's a wholesaler that wants to JV/partner on a deal then sure but having a daisy chain is a train wreck waiting to happen.

What should be my course of action- I really don’t see the tenant appreciating what has been done and would rather break the lease. 

There is a lot of training involved, it takes months (up to 2 years), and they usually like to start them off as puppies.

Of course, he is free to come here and prove me wrong.