Question on rebuild, garage with rental on top or single family

[Christian Huyge]

I purchased pre 1900 home behind my current residence 2 years ago. Our lots are small and I wanted that property for the yar so my children had more room to play. The plan was to redo the home and rent it out. After digging into it, the cost to rehab it would be more than to tear down and rebuild. The city has strict STR laws and once thought was to combine parcels, build a 3 stall garage with a 2 bed apartment on top. They do allow STR if it is from your primary residence. I am hoping (but not have dug into it) that joining parcels would allow me to use as STR since it would be on the same parcel. It is zoned single family, and the city makes it near impossible to change to multi family at this point. I do feel like possibly in the future with the need for more housing they may become more lenient. With that in mind I had thought to build a "single family home" but with a layout that would allow for an easy conversion to a duplex (running gas lines to second floor, have full bath on both levels and ability to convert rooms into bedrooms as needed. I would love a 3 stall garage (currently just have a 1 stall) and renting a 2 bed would bring about $1,200 to $1,400 per month. Having the single family that I would look to make a 3 bed, 2.5 bath would bring about $2,200. The duplex idea would be 2/1.5 ($1,400) and a 2/1 ($1,200).

I do have a couple other single family rentals and 1 str. I am a real estate agent, but I do not want to sell because the kids are young and I want to keep the yard.

Any thoughts, ideas, suggestions? I have been sitting on it for WAY too long. Appreciate any input!