Still, the main question is whether or not $500 per month to principal + $200 per month rent with low/no cash flow is better than the refi for cash and the lower payment option? 

We are currently in the market as a brokerage and also buying investments as Principals.

Then we add Depreciation and principal pay off part of mortgage.

It will also leave it up to you to pay principal down, as your monthly payment is usually minimum interest only.

A freeway may be ok for young professionals but may be a draw back to the elderly and or families.  

Are there any drawbacks?

@Patrick SearsSpeak to your accountant but depending on your overall business you will leave the expenses and the principal on the balance sheet and pay taxes on the interest earnedYou don’t write off renovation etc. you also don’t deduct the depreciation typicallyBut I am not an accountant just telling you how my accountant does it but my situation could be very different

This will protect your father-in-law by knowing the principal is required to be paid down and ensure you don't lose out to variable interest rates.

This should be paid off in 5 months, I will immediately use my Cashflow to pay the principal down on my mortgage which is around 303k (which desperately needs it).

Also, more doors = more debt utilized for principal pay day, great appreciation gains, and diversified risk from vacancy and repairs.