There's no guarantee that you wouldn't get a fine if DOB gathers that the unit is actually occupied as an apartment, but it does happen that people who attempt to legalize existing illegal conditions before they are discovered by the city avoid a fine.

You can have a bad tenant, bad guarantee, bad location, bad access, bad sightlines, poorly structured lease, amortized TI with inflated starter rents, poor or no rental increases, etc.Tons of variables with NNN investing.

You may be not smelling it , because we tent not to smell our own odors, but if I come in to your house I guarantee you 100% there will be an unpleasant smell to it.

If you go the lender route, they'd most likely  be looking to you to personally guarantee the loan.  

With the assets you're describing, I can almost guarantee it won't be sustainable.

On the other hand a rental offers additional income (not guaranteed, of course). 

You have the most to lose here and there’s no guarantee he will even finish the projects, which leaves your assets vulnerable.

@Brandon Tobalski there is nothing like meeting real live investors and I guarantee there are lots right around you.

It sounds liker you are asking for the bank to issue a loan (HELOC) against an asset that it doesn't own (your home) with you personally guaranteeing it.  

How to measure the pro/con of a guaranteed annual return of 4.25% (because interest is not deductible more like 4.25/(1-.33) = 6.34% return, as well as having  $2100 to invest -as opposed to having $6660 per year to either invest -or to pay off the 30yr ( 18yr pay off at $555 additional).