It’s a heated market and the property taxes will kill your cash flow.As far as choosing a market, just look at the population demographics, Price points, crime, industries etc, incomes Look into it but don’t overkill it.

Tenant pays their own heat and Electric.asking price $265,000.00taxes $7500Unfortunately I don't know how much the water bill and gas bill are and don't know what the extent of the rehab for the remaining 2 units.Any advice, comment or replies to this thread will be greatly appreciated.

The property sounds like a Cape Cod style adding a bedroom upstairs and installing a heat source will definitely up the value and rental rate but is it worth the cost, a good manager will be able to advise you of that too as they are licensed in real estate and can give you an opinion of value.

Natural gas installed for heating and hot water.

So we put in new heating and cooling plus duct work, brand new kitchen all new laminate flooring plus a third bathroom.

Heat gun can damage the wood.

Splitting utilities heat electric water etc .. make this conversion expensive

If so, you’ll probably be paying more as the heat from the roof is coming down.

I could potentially understand longer than a few days...and even that would depend on how bad the heat was. 

In order to count a room as a bedroom on an FHA appraisal, I believe it has to have heat and have its own entrance, meaning if you have one bedroom that's connected to a hallway, and on the other side of that bedroom was an attic that you made into a bedroom, you would have to walk through one bedroom to get to the other and I don't believe this is allowed.