It can be a big undertaking, although there can be profit in it IF the numbers are right and IF you have done your homework to know what you are getting into (both big “IFs”).

Option 3: Add a wet bar - The in-between option is we add a wetbar to the basement and a few inexpensive upgrades and then request permits from the city in hope that we won't have to undertake a bigger project in order to legalize the basement and save some money and reassess. 

It's a noble effort you are undertaking here for sure...auditor data is "open" now and most have a very good interface with GIS (check out MapBox or even Power BI)...odds are high that county auditors in these locations are on the same platform...they will have neighborhoods defined by "codes" you can use to define areas...your auditor will also have a "reporter tool" (more than likely) to draw down csv files with the data you need...since you are an agent, you'll want to overlay your MLS data for a complete picture...That said, you can draw neighborhoods with the MLS map tools, pull closed comps for specific neighborhoods and do your analysis from there...our MLS has a data point for rents...this is the only way to see "market rents"All this is a moving target and requires a lot of attention to cleaning and updating your data to stay accurate...

that's a huge undertaking (not saying impossible) for your first deal. most people end up being on the low side of things. like everyone else had said, your operating expenses are really low as well. 

Rising property values tend to encourage homeowners to undertake renovations.

A relative asked us to help with an addition of theirs and just helping get that off the ground has been a large undertaking compared to the few commercial projects I have helped with.

While this project is a big undertaking it will be well worth it once it's completed.

@DJ Dawson & @Joe Bertolino thanks for the replies.I'm currently undertaking something similar in NYC, and here 26% annual interest is usury. 

It can be a big undertaking, although there can be profit in it IF the numbers are right and IF you have done your homework to know what you are getting into (both big “IFs”).

Did you undertake the loan if you had a capital partner with none of your own money in?