Gutted one bathroom- vanity, shower/tub, toilet and will do the second bathroom tomorrow.

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. 

I am in between 4 houses to purchase, gut, rehab and flip.

@Daniel Garcia, instinct tells me that you wouldn't "need to take into consideration the fact that the down payment is costing me 5.5% plus (loan) closing costs", because, that's already being accounted for as an ongoing expense against the property that you refinanced!

This type of deal works best for highly distressed properties that need extensive repairs, major remodeling, or a total gut.

Driving the neighborhood and developing that gut feel -sounds like a good idea. 

That is carpet, paint, cleaning and half a bathroom gut.

I kept the current tenants in one unit and gutted the other and renovated it and will be moving into it in a week. 

With all that said, mine was a total gut job, so if you're just updating stuff, and can get a project completed fairly quickly, the stress shouldn't be as much. 

 I have one house now that was gutted and inherited by kids who avoided every attempt I made to contact them.