So if your end product is 40k  lets break it down.. not a sales pitch or what you want to hear.your turn key company or provider is going to want to make at least 10k.. that's common in the industry.. that leaves 30k to do all this... your contractor putting it all together wants to make 3 to 5k.. so that leaves say 25k to put it all together.to have a sustainable rental.. you need New mechanicals new roof.. sewer scoped and replaced if needed up graded plumbing and electrical.. new paint and flooring.. cabinets and appliances and hot water heater.. this all cost at least 15 to 20k.. leaving you to pay 5k for the asset...

You could then upgrade to the self-directed format once you actually have funds to meaningfully self-direct.  

But upgrading to a larger tile would be an easy way to update the look. 

You may want to convert to gas for heating the 2nd floor and upgrade the electric to accommodate baseboard heat on the first floor since I'm assuming you'll hold this property long term so you'll want to make heat the tenants responsibility.

I will be upgrading the both units, and was wondering what you guys and gals would suggest as far as the quality of upgrades for rental vs owner's place.

Or you can buy a house, wait a year and buy another in a similar location, but you can only have two in the same area, the 2nd has to be considered an "upgrade".

My question is: is it possible to raise the rent up to market rates if a new tenant is placed, or does the unit need significant upgrades to justify such an increase?

would converting an older home into a duplex be considered an upgrade then?

We own another duplex in the area that has done very well but bought it 7 years ago.Sale Price: 426KBeds/Baths: 4 beds 2 bath on one side/ 3 beds & 1 bath on other side which can be upgraded to 4b/2bath.Closing costs: $8749 on Mortgage:  4.5 % 30 year mortgage with 25% downRepairs & Rehab costs: 30-50K to add AC units, new furnace, new electrical panels both sides.  

The mortgagors reported the mortgage interest on their returns, which excludes us from being able to capitalize the same interest on our returns.There is more research being done..we shall see what becomes of this situation.Another quirk in this situation is that one of the properties we signed a lease agreement with permission to upgrade the property.