I don't really want to invest in a D-class area.Tangentially, what are some of your "it's time to sell this property" red lines when it comes to the changing economic conditions of an area? 

Leverage will not change the effort or risk in the areas OP identified.  

Depreciation Recapture is calculated on any property that was ever depreciated, regardless of elapsed time or usage before/after the rental period.

Very important that you do a lot of research on who ever you do business with.

The tricky part will be to get the the city to change your property's zoning to multi family (if it isn't already).

@Zach Denny Did you ever put your deal together, if so I'd be curious what the bank required on CLTV and if you had to source the total down payment (PP-First Loan) then apply seller second, or if the bank let you do all that at closing functionally making your DP = PP-First Loan-Second Loan.

You don't need to change your investment strategy; continue to invest the same way.

In U.S things changes a lot from France and the rest of western Europe.

I don't ever stiff the housekeeper and if this was a long term tenant who needed to break early I would do it but probably not in this case, again unless regs require or mom presents a more compelling case. 

I'm a Realtor with a couple properties listed in Boise, ID and a neighboring town for my investor/client that are currently rented as co-living or rent-by-the-room and getting killer income. (7.3% - 9.5% Cap rate) So far, every inquiry has been baffled by the concept of co-living or rent-by-the-room and immediately ask if they're being run as a halfway-house (which they are not).