Covina house with a pool and 1.5 car garage - strategies?

[Mikhail Petrenko]

I just bought a VERY dilapidated hoarders' house in Covina for the low 300s. 

1114 sf 3/1 in basically tear-down condition. I spent over 10k on the clean-out itself. Due to extreme mold, fire, smoke, and water damage, we can`t save the roof and rafters, we needed to tear down all drywall/insulation/flooring. The city wants asbestos and LEAD tests too.

The pool equipment was stolen, it has some minor cracks.

I have the next scenarios:

1. Make a small addition to the main house (-> results in 1250 sf 3/2), do a full gut remodel and new roof framing/roof, and convert the existing 16x25 garage to a tiny 1-bedroom. My budget is 200k, ARV is 625k+, and the projected rent is 4000.

or

2. Restore the main house, convert the garage to ADU and build one more house (you can have 2 ADUs in Covina) 800 sf. My projected rent will be 6300, and it is hard to predict ARV due to the lack of comps (houses with 2 ADUs). And all neighborhood homes only 1 ADU maximum.

Also, should I keep the pool?

It will be dozens of thousands to restore it (by ballpark quotes of GCs) and only 10k to demolish it,  and it will be extra liability, but it can give (?) resale value to the house.

Thoughts? Thank you!