At that time we could renovate the ground floor apartment and potentially turn it into (2) apartments for a total of (5).My questions come down to how do we deal with the existing 40k mortgage, whether we can make it work so her parents aren't paying much in rent, if anything at all, and whether or not we set up any legal entity, like a trust to help the legal situation of paying off her sister down the road. 

Investors with sub-4% rates have a big advantage, while new investors need to adapt—whether through creative financing, value-add strategies, or finding better deals.

Maybe consider a conventional reno loan like the Homestyle or CHOICERenovation. 

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Whether it’s reconfiguring layouts, adding square footage, or converting single-family homes into multi-unit rentals, the goal is to unlock value where others don’t see it.Distressed properties aren’t for everyone, but for those willing to put in the work, they offer some of the best returns in real estate. 

If I build again I’ll go in with a partner and shoot for a duplex or smaller home.

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And never let friends or family rent from you. 

Is there debt on the property or are you doing all cash?

They can find and screen good tenants, so you don’t have to worry about them not paying rent or taking care of the property.