The IRS has provided a safe harbor for certain structural modifications to a building that are not treated as a demolition and thus, not properly chargeable to the capital account with respect to the land on which the building is located.

DO NOT use HUD's maximum rent allowance as a metric for determining your own market rent.Moreover, when a section 8 tenant applies for rental assistance, the housing provider will essentially underwrite their application to determine their voucher amount.

Do I only report that $1000/month as my actual rental income and the extra $500/month as a capital improvement?

There’s an extra space on the 3rd and 4th floor for another 4 units to be created.

There's a lot of movement by a handful of Federal regulating bodies that are pushing to provide honesty and transparency up front for consumers.

Can provide my LinkedIn as proof. 

Won't show extra documents posted in MLS though.99% of the time these are not going to give you lockbox access.   

Any communication after this between the two of us, I would appreciate go through Jordan, since I truly do not need any added extra stress.

It does not give you the protection of a properly formed LLC, but it does provide a bit of anonymity and can spell out the division of income to the beneficiaries in the trust docs.There should be no transfer tax involved with the trust, and it will not trigger any due-on-sale clause thanks to Garn-St Germain.BTW, if you do use a trust, only record the Deed into Trust, but NOT the entire trust declaration. 

Many times that looks to be a HUGE risk to try and net and extra $300-$500 PER MONTH against potential for bankruptcy.