Older people have decrease circulation, they start to always feel cold as they age.

Dead equity will decrease your potential income as opposed to increasing it.

VRs can also increase long term rent as "affordable housing" properties decrease. 

I certainly understand your mindset, however I would go with the 2nd rental property rather than paying off the mortgage right away.You might initially have less cash flow, but rental income should increase while your mortgage payment should only be decreasing (assuming you don't have an adjustable rate mortgage).I also like the idea of having more than 1 rental property because, if each property is cash flowing like they should be, you have more of a financial cushion during periods in which one property is vacant.

If you just had a really busy month and then the work drops off, you're then looking at terminating someone's employment or at least decreasing their hours.

It is part tech so the value could also increase or decrease with any new updates.

Frankly they are a good idea to decrease slipperiness too.

Would this effect the property value by decreasing the income I could have had for this unit or could rehab be considered a years rent for tax and property value purposes? 

Sure, it may not be directly $500 due to tax benefit of interest but cash flow will not decrease by reducing leverage.  

If I did that, it decreases my monthly cash flow to $436.