I will say up front, I have seen so much conflicting information on this space and where the market is at currently, I’ve been airing on the side of caution and waiting for a market pullback on valuations.

I would think this would be less risk than traditional office space.

I would advise you to stay out of your parents financial life.You should also be moving out of your parents home then if they choose they can rent out your space . 

The new bathroom will be made bigger with plenty of space off the old bathroom downstairsThe hot water heater will need to be removed as well with proper codingKitchenA new kitchen will be installed downstairs.

Total building size would be 2300 sqft minimum including common space, plus add a garage.

You'll likely need to leave your employment before you can access the 401k funds.

How do you handle disputes over common area use, stealing food from each other, taking out trash, someone that monopolizes the space, etc.?

For other properties I put a picnic table in the back yard - this is much appreciated by the tenants - especially for my bachelor units/one bedroom tenants who don't have a lot of space for dinner with family and friends. 

I will also have access to a VA loan so that is another thing to consider.

I'm in the process of purchasing a commercial building with two business spaces.