If you don't have water, sewer, and power at the property already, it will substantially limit how many units you could feasibility build even if 100% of the land was otherwise usable.

I recently have a water leak in a house.

Views are 4X and conversion is double over my 2/1. 2- and 3- bedrooms are the squishy middle with tons of competition, but when the potential guest needs to sleep a large group the pool shrinks dramatically. 

If the landlord is paying any utilities that are based on usage such as water, then I might discuss a rent bump to compensate for the anticipated increase in usage and address that with the lease update adding the person as an occupant. 

that will also open up a larger tenant pool.

You have $606 after tax dollars to spend on the rest of life's expenses, including investing, buying flowers for your significant other, cell phone bill, water/electric/vehicle expense/food/childcare/hair cuts/vacation. 

:Class A Properties:Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.Vacancy Est: Historically 10%, 5% the more recent norm.Tenant Pool: Majority will have FICO scores of 680+, zero evictions in last 7 years.Class B Properties:Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.Tenant Pool: Majority will have FICO scores of 620-680, some blemishes, but should have no evictions in last 5 yearsClass C Properties:Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation.

Aesthetics won’t be an issue and it will pay dividends in the long run with eliminating landscaping/lawn and water costs.

If not, what happens when neighbor owner isn't maintaining their roof and water leaks are impacting your tenant?  

Reason being, if you're shopping for a new PM, a nicer property with less of a hassle on maintenance will open that pool up.