Im only thinking about doing this because I think he wants at least 400k.Does that sound like a smart plan?

Having strong agreements, clear communication, and contingency plans in place can help mitigate risks before they become major issues.

Increased revenue and decreased parking demand allowed us to carry income-restricted units as well.We originally planned on spinning it out into a brand, but we never had the bandwidth to do so.Our largest hurdle has been education as most of our tenants are coming in to rent traditional units.Investors did not love it. 

.: I just hired an architect to design and plans submit for ADU in my 8 multi unit to use the tuck under parking.Some people say do not try to be the general contractor as it will take way more time, costly mistakes and will be nearly impossible to manage with current work. best to hire a company that will do it all and cost about $250 per square foot.

So instead of waiting for the problem to compound until the lease is over, the plan is to replace the carpet immediately rather than try to muck with cat urine and get it 80% clean with various other solutions.

would get estimates and see how long to recover the money and your long term plan for the property

My plan is to start house hacking.

But, sometimes waiting and stacking cash for another opportunity is the best plan. 

This would apply to your unit.Your biggest concern with setting the rent should be the near future. 1) Your insurance is guaranteed to go up, probably dramatically.  2) You may get an insurance assessment bill to cover the CA Fair Plan losses.

The game plan would be to keep this structure for 1-2 years with future full sale.