Since the HOA covers the exterior I only need to have a walls-in policy.What is a good way to determine the right amount of building coverage?

That means the building exterior and the landscaping. 

It might be able to be done without even losing a bedroom, but even if it goes from 4 bed 2 bath to a unit with 2/1 and a 1/1 unit, the rental income (or sale price) should be higher than a 4/2 SFR in the area.That said I'm not sure if there's something I may be overlooking.It already has 2 exterior doors positioned nicely with separate porches and room to have cars parked on different sides of the house (it's on a street corner).I looked up the zoning regs for how the plot is classified and it is allowed by right (don't need to apply special allowances or rezoning) to have multi-family housing on the plot.The rehab would already have it gutted enough that the changes to plumbing and electrical would be easier.I don't have any idea how hard it is to get separate metering for water/gas/electric. 

The landlord is only responsible for maintaining the exterior or these units and they are relatively easy to rent. 

Lack of ventilation is clearly causing your mold/mildew problem, so a functioning window will help, and the larger the opening the better.It does require a match on the exterior finish material to fill in the size difference, but these baths are always on the side or rear of the house, so it's not very noticeable.The fact that it's a different size and more contempo-looking than the older original windows, isn't a compromise on esthetics, either.

I have a great off market property that is cash flowing over 8% cap rate and has VA guaranteed rents in 6 private (all have exterior entrances) spaces in a SF residence.

I realize that this strategy is not for everyone but I think everyone needs to assess their own strategies and capabilities before simply saying something is or is not a viable option.Here are the before and after pictures exterior pictures:BEFORE:As you can see the exterior definitely needed a good bit of work.

I already took a look at the home and jotted notes today and it needs a lot of interior work in every room and some exterior work.

You can loose a year of cashflow very quickly to unexpected roof repairs, furnace or air conditioning replacements or even exterior painting for a random C of O inspection or a shocker come tax time.

It needs flooring (some rooms were partially floored and the rest was cement, it needed paint interior and exterior, and had lots of items that went to the curb (including a spinet piano).