SFH Conversion into a Duplex...worth it?

[Susan Elliott]

I'm in escrow for a SFR in a high-density zoning area. Part of my strategy in this market is to turn a SFR into 2 rentals by fully remodeling the basement into a 2-bedroom unit. I'll be house-hacking this so I can use FHA. I'm debating whether I should go through the planning department and convert the SFR into an official duplex with the city. Alternatively, we could just rent 2 separate units in the SFR. The benefit is that resale value will be higher and we'd go through the effort of splitting the utilities so renters can pay. The additional cost (~$12K-$15K), however, will take away my "safety" cash reserve and drop me from a ~10% ROI to an 8.5% ROI.

Has anyone completed an official SFR to Duplex conversion? Thoughts? Other strategy ideas here?

So excited for my first REI deal!