It's understood you and your father have the experience to undertake the conversion but you must factor in the cost of drawing up plans and getting permits to convert into two new apartments.  

Your Realtor should be able to help with some of these questions.   40 units is no small undertaking!

Is this too much risk and too big of an undertaking for a new investor?

It would be a pretty big under taking with them still occupying the unit due to their equipment. 

If you are starting off in investing, why jump in by taking crazy risks like flipping or going for it all by getting properties that require massive undertakings only to deal with monsters once you're all finished updating the property?

However, I did not say "own free and clear" and everyone knows that we still have to pay property taxes.I was referring to being able to make a house my actual home in that I can paint, redecorate, etc. to my taste instead of keeping things generic like I expect my renters to keep my houses. 

One at a time you move into each one and live there until it's time to redecorate and then you move into the next one instead and take the tax free opportunities of sec 121 on your sale (again there's some limitations on the exemption because of the 1031 but still tax free benefit available.e.

We like the idea of investing in an apartment complex but to this point, only have 3 SF rentals and lack the experience of undertaking such a large project.

I've been an active reader on the forums for about the last year and I'm ready to undertake my first deal. 

I would really like some experienced opinions on whether or not this would be a worthwhile undertaking.