He will be able to give you absolute clarity on this and ensure you have a full understanding of all the different inputs/outputs for each specific deal as they all vary. 

I'll ensure to update my house rule accordingly.

Check local zoning laws and building codes to ensure converting the basement into a separate apartment is permissible.

It's crucial to conduct thorough due diligence on the property to ensure it has potential for value appreciation or can be renovated to increase its market value.To learn more about seller financing and strategies for adding value and reselling properties for profit, consider studying real estate investment books, attending seminars or workshops, and networking with experienced real estate investors who have successfully used this strategy.

Would be a great achievement if it works - I would also reach out to the railroad track company to ensure there won't be any disruptions or issues they may have when/if you start the development process. 

My question for you more seasoned investors is, what policy terms must I make sure are part of the policy I end up selecting to ensure maximum protection of my asset?

This thorough process ensures higher chances of getting the desired price and timing.

Ensure clear lease agreements and screen tenants thoroughly.

My verdict: it could be a winning play given your equity and potential upside, but carefully weigh the pros and cons.Crunch the numbers: Factor in all expenses, potential vacancy rates, management costs, and ensure the cash flow covers your mortgage and leaves you with enough buffer.Consider alternative Bay Area locations: Maybe there are suburbs with less pressure on prices but still good rental potential and appreciation prospects.Don't rule out the single-family option: If the numbers work and you value the lifestyle, don't discount it entirely.

Perform due diligence, including soil tests, environmental assessments, and surveys to ensure the land is suitable for construction.