My concern is whether the city could deny permits for these modifications, such as removing walls or converting a garage, or if they are mainly just concerned with safety and habitability.

So talk to the city to see what they'll need before you can sell the lots. 

Hi There @Chinelo Ononye - Don't be afraid to keep investing here in the Windy City if it's your home lolWe've got an awesome real estate community here in Chicago and would be happy to connect to see how we can help.Generational wealth is an amazing aspiration and there is no doubt you are the "one" in your family that is going to make that change.  

I got a note from the USPS asking me to show permits of the units from the city of Bay Point, CA.

Is it a legal 3-family on the city card?

Then these are applied to all properties in that area of the city.

Quote from @Waylon Bruce Moore: I own a house in the Wellswood neighborhood across the river from Seminole Heights in the city center of Tampa.

Cities usually don't care if the OWNER lives in the basement, just tenants.You could use the extra income to offset cost of finishing basement and more.

I've done all of these locally for noticing packages that the City requires be sent on certain projects. 

But historically in my experience it was never done on time and i would get notices from the city about it.