Option 1 will cost more upfront, but be easier to mitigate month to month and boost cash flow and have more breathing room with monthly expenses. 

And sometimes even it can boost your ROI which is fun but decrease your NOI to a point where you're at risk of being under capitalized.The other point to consider is that when you refi you will not have access to as much buying power as if you simply sold and 1031d. 

ARV with rents to market rate would boost that number to 1.3M.

None of the pics say "wow".Also, many tenants in urban areas want to see the outside of the building, so curb appeal is a positive.Also, what is the title of the ad?

Even when running the numbers on a home where I could boost the value with a renovation, it still seems to cashflow negative, or at the very best break even.

I had a contractor that I used a handful of times just poor a curb that looked like it was poured by drunk. 

I definitely like the idea of renting out the main and living in the smaller unit created to boost income.

That's your choice.Then I'd talk to a Landscape Architect and have the person come up with some curb appeal ideas, and then get bids on that.If the total cost comes in below the per door cost to move forward then it "MIGHT BE" a go.I believe looking at each unit as one job to be completed is more intuitive than looking at the whole complex as a job to be completed. 

Not sure which has done better...leverage boosts returns in an up market.

Does the existing building need an injection of capital to complete rehab, and thus boost NOI?