The added area is having a small laundry room with water heater in there.My idea - Converting it to a 4 bed 2 bath by adding closet to the second living room and converting laundry room to bathroom.But how can I move around water heater and washer dryer?

3/1... is it possible to convert a large closet into a 1/2 bath? 

Has 2 closets as well as a slider door to the deck.

Our upstairs unit is a 3 bedroom (really a 4, but one room without a closet) and the downstairs is a 2 bedroom (where we live) so the upstairs unit covers majority of the mortgage which has worked great.

The other parcel has 3.5 acres which has an all brick ranch house built in 1967. it has 3 Baths, 3 Bed. 2 fire places. it was custom built. cedar closets, knotty pine wall, partial finished basement, two fire places (one brick one marble from italy) It also has a HUGE cinder block barn (2 levels) on the property (as it used to be used as farm land a long time ago). 

I'm in portable self storage.

But we did a Master Bedroom addition, and created a walk-in closet and Master Bathroom where the old master bedroom was.

Is your job portable? 

We fully enclosed an area in the large living room adding a closet and french doors.

— no one had a problem with this and everyone complied. 4) I told them upon entering that I would open/touch all doors, drawers, closets, light switches, etc... so as to minimize surface contamination.