If you're open to a bit of creativity and local regulations permit, converting additional spaces like garages into rooms can further enhance your rental income.Overall, your strategy has a good direction.

We plan to convert the sale proceeds into multiple properties to create passive income. 

What happens if, in the next few years, we decide to move and convert the 2-BR unit to a rental unit?

The property is currently doing two long term rentals and I live in the 3rd unit, but I plan to convert two units into STRs this summer.

For rental income reported on your schedule E, a different calculation will be used.Your current primary residence can also be converted to a rental. 

Quote from @Reggie Nworie: Hi Grant, Yes, there are lenders who can do Ground Up Construction and then convert your loan into a DSCR loan if you want to keep it as a rental.

This was originally a barn built in the 1940 that was converted into a home in 1996 by a non-licensed handyman.  

The house can be converted back to sfh, but I really don't want to do that, because it's going to cash flow beautifully as a duplex.  

Removal or deactivating will cost a few thousand but not 10s of thousand and you might want to convert to gas or upgrade to a more efficient boiler anyway.  

It's a drainage issue and when it "floods" it get a couple inches in some spots and quickly goes out.