Placing these monies in reserve prevents you from getting caught flat footed, when the tax bill comes due or the A/C blows up.  

The downside is the required reserves are high...like $350 per door.

You need good cash reserves for this though as the cash flow won't be there for the first 12 months while you bring the units to market rent. 

So I would guess he doesn't "need" to cash out refi but it is a great option with low rates.This lead me to question my local bank and they will do unlimited loans (25% down, 6 mo reserves) at 'fannie/freddie' rates.

The reason they're so low is because the Federal Reserve is attempting to stimulate the economy, as the economy is weak (and Corona is not to blame - the economy has been pumped up for years). 

Reserves can get tough when you dollar is only being counted at 50%.So, if your deposits aren't any better and your income is still "low", then DSCR sounds like an excellent option for you where you personal income plays no role at all. 

Also I hope you are keeping data of all your previous reservations (even on Airbnb we saved their phone numbers) you can constant contact their emails if you have them and twilio campaign their phone numbers into a direct booking campaign to get direct bookings (make sure you have a direct booking site).

Having enough cash flow and reserves will be as well - for you, not for the lender. 

I would be crunching some numbers around the cost of Mortgage Insurance vs putting that extra $20k down though if you aren't completely depleting your reserves by spending the extra $20k. 

Just ensure that you have adequate reserves if/when the bad day hits -- My personal reserves for all of my investments is 6 months of expenses.