Simultaneously, you could either convert the existing SFR on the front lot to a duplex, or build a second SFR on the front lot, or potentially demo the house and rebuild a new duplex on the front lot (demolition has some restrictions, which you can look up on the city's website).

Most of the time in my experience, a non-conforming designation is there for future development purposes (dos and don'ts) and also incase the building burns down, the city will not allow you to re-build the same 2 units.

I do wonder how a bank lends on a 25k house that would cost 100k to rebuild. 

. -- although even if you are in HPOZ, there's very little they can legally do to stop you do an ADU, especially if you aren't doing any substantial demolition, and there are ways around some of the hillside restrictions depending on where you are)Cost- It will depend on the condition of your garage's structure (footings, slab, wall framing, roof framing), the distance that's required for trenching, any electrical panel upgrades or location changes, and your design intent- Check that your garage has footings that are deep enough below grade (12" min in LA City, 18"-24" elsewhere) -- if not, you'll need to underpin or rebuild them- Check that you have concrete curbs, as these will help stop water intrusion from adjacent soil -- if not, you will want to find a way to add them, either by making the contractor do surgery on the building, or by adding them as part of a larger demo+rebuild strategy for the entire garage- Look at your slab.