Rental-should I add bathroom on main floor?

[Matt Allen]

Looking for advice on my situation:

I purchased a listed 4 bedroom 2 bath house in the North College Hill Area of Cincinnati last year (1900 sq feet). I paid $115k. I rented if for $1,350 per month. It is a two story home plus a basement. The second floor has 3 bedrooms and a full bath. The second bathroom is in the basement and I spent 4k to re do the basement bathroom. There is a room next to the kitchen on the main floor (10x10) that is listed as a bedroom.

The tenants are not renewing their lease. There was plumbing issues with the basement bathroom and I am told by the plumber/pm that the basement has a separate sewer line to the street and needs to be replaced to be functional. The property manager is encouraging me to scrap the basement bathroom and instead turn the main floor “bedroom” into the second bathroom. My concern is the house would then be considered a 3 bedroom house instead of 4.

The pm says one less bedroom would not affect the rental price. PM said if I just scrapped the basement bathroom it would rent for $1,200.

What should I do?