This is how everyone does it: allocate an image file and present it to the iscsi initiator (the client).
I would suggest though to allocate it on the cache, if available, because its usage will be exactly the same as VM's vdisks so performance will suffer if allocated on the array.
Configuration on the iscsi target side (unraid in this case) is pretty straightforward. Each iscsi volume (image file) needs the volume path, authentication details (optional, e.g. CHAP2 username/password) and a couple of other (optional) options.