Consolidating Duplex to one unit or Keep as two units

[Jessie Harrison]

New to BP and first time post. I have purchased a rental property that includes a 2,000 sqft SFH and a stacked duplex (both units are 860 sqft - top floor is a 2/2 and bottom floor is a 1/1). The bottom floor of the duplex has been completely gutted due to prior leakage from the top floor. It also has ceilings that are lower than 7ft (as does the top unit). Also, the top floor is basically move-in ready.

 I am considering making the top floor a 3/2 by consolidating the bedroom from the first floor to make this one unit.  My logic is that is may be more cost effective in the short run.

As it currently stands, I think that the top floor duplex could rent for $650.  I think the bottom floor (if updated) could rent for $400. It will take around $20k to make the entire bottom floor move-in ready, whereas it will take less than $5k to make the first floor bedroom a part of the top unit.  If this option were done, I think the unit could rent for $800.

Please let me know your thoughts and suggestions.  Thanks for your help.