I don't have many details other than it's 11 acres with a future road through planned. 

My plan is to purchase another similar mixed use property, however I run short or the 25% required down payment for commercial loan.

Some HML may be ok with desktop appraisal/BPO compared to a traditional lender.If you are doing renovation then the draw process i find private lenders to have more flexibility in regards to draws and number of draws. a HML is more convenient but you will pay for convenience. 

It is specifically "Fair Rental Value" that should be included in your plan.

Side note - he'd be better off if his tenants were scared off since they are paying far below market rent!

Given rates, I an looking at about maybe 100$ a month plus after paying back heloc on cash out.

You'll want to look more at the closing costs than the interest rate since you should have 50k worth of work done in a few months and your rate is annualized meaning that you'd be paying about 1% interest per month.

I am happy to sell the homes for reasonable amounts, and would always prefer to sell to the tenant if they can / want to buy it on a payment plan.

Additionally, you may want to ask your insurance broker about rental income coverage as a landlord which could kick in if you have a non-paying tenant. 

The difficult part is going to be for buyers who will have to either come up with the funds to pay their broker or negotiate seller paid closing costs to cover it