Per the seller there's an additional detached shed that has water running to it that could possibly be made into a 3rd unit if the city will allow it.

One lady is living in a shed in the backyard.

I also wanted to add 2 storage sheds so that each unit has a shed they can store extra things inMy thoughts were that if we are adding features to the units/upgrades, does that mean we can charge higher rent (I was thinking $1350-$1500). 

Only issue is if you want to sell while construction is going on it might deter a lot of buyers (and renters)The duplex I sold IF I had decided to keep it I probably would have looked at converting it back to a triplex (its configuration probably from about WW2 through early 2000's)  - I would have needed to basically replace a couple walls,   modernize the heating system,   add a third and maybe 4th common electric meter,  and find somewhere (probably a shed) for a common W/D and locate a 3rd/4th water heater.    

Here is a link to an article about Prop 8 that might shed some light on the situation.

Can someone shed some light on these items? 

To be fair let me try to summarize my current position, maybe it can shed light to something I may be overlooking that you see along with your first response that may help me understand more.This process below in approx. 14 months between each transaction.House 1 Primary purchased 0%down/0%pmi (cash out refi)House 2 new primary (house 1 rental) purchased 0%down/0%pmiHouse 3 new primary (house 1, house 2 rental) purchased 0%down/0%pmiHouse 4 new primary (house 1, house 2, house 3 rental) purchased 0%down/0%pmi (cash out refi on house 2)

However, I’m system oriented and I don’t want any leads to fall through the cracks.I’m for some experts on here to shed some light on CRM they use that integrates with Propstream (not important though), BatchLeads, and BatchDialer  A little background on what I’ve inquired about before, I jumped on a Zoom with REI Reply and thought it was great.

There is a shed and a 2 story garage on the property which is being rented as well as 4 coin-operated laundry machines.Also, the seller has done a tremendous amount of work which means less repair/cap ex costs for me if I purchase it.The only way I could make this work is if I can get an FHA loan and house hack it.With these numbers I know it's not cash flowing much and it wouldn't be if I were to house hack.

Wonder if any lawyers out there can shed more light on this.