My SFH could be converted to a duplex... But should I?

[Darius Argentinis]

Hi all!

I'm in the process of acquiring a SFH. My plan is to house-hack while I'm living in the area (probably for the next 4 years) and then hold it as a rental property, or sell if that makes sense at that time. I like this deal because I feel like it has a lot of potential but I'm having a hard time settling on exactly what I want to do with it.

The upstairs is finished and has a kitchen, 3 bedrooms and 1 bathroom. I'm pretty comfortable on what I'd like to do with renovations there. The basement will constitute the majority of the work I need to do on this property. It's unfinished with an abandoned bathroom that will require a full rebuild. The basement happens to have its own private entrance and its own driveway, which makes me think that it may have been a duplex at one point in time, so it's looking like I could do one of two things: 

Option 1 - Keep it as a SFH and force appreciation by finishing the bathroom, adding bedrooms, and adding another living space or laundry room kind of thing. The advantage of this would be a simpler/cheaper renovation. I also think it would be easier to sell if I decided to do that when I move out in a few years.

Option 2 - Convert the property into an up/down duplex by making the basement into its own separate unit. This would make house-hacking more comfortable now and leave me with two units to rent in the future, but the renovation will be much more expensive because of the need to build a kitchen/kitchenette. I'll also need to be a lot more creative with designing the floor plan.

I know a lot of the specific details will depend on my local market (Des Moines, Iowa btw) but has anyone had to make this kind of decision before? How did things play out? If you converted your SFH to a duplex, were there any unexpected problems/surprises on the legal/regulatory side, like being unable to rezone the property or get a rental certificate?

I'd love to hear your thoughts. Thanks in advance!