I'm imagining something more like add a wall, turn a bedroom into a kitchen-living on one side and a formal dining room into a bedroom on the other side, maybe add a half bath in each unit.

Rarely do they like such units being operated in such way.

For example, avoid wasting time comparing new construction with sun-soaked windows to basement units with stained drop ceilings.

Quote from @Olga Daisel: @Randall AlanI agree with Randall on getting more details, $7K gross a unit btw is a great gross income.

And it's not only homes, it's all the infrastructure a city needs.On the insurance issue, I think this may be the end of national carriers.

I have one tenant who is a god send compared to most, he accomplishes nearly ever repair I need, even did an HVAC unit. 

Obviously with notable exception like the crash of 2008 that hit nationally. 

They are a national organization that promotes all kinds of creative real estate deals. 

I am conflicted on whether to use the 500K on one big property (ideally multi-unit) or buy several smaller properties.

The loan is with you, not with your tenant, so none of that means anything to them - in fact because you live in one unit and it's under 4, if you were self-managing you don't even have to abide by fair housing laws (at least on the federal level).