This converted to a non financed cap rate of about 8% at closing, then with some swift expense adjustments brought that up to about 11%. 

Yes, when you are ready to acquire the property, there is a planning that can done regarding  what kind of property to acquire to mitigate taxes, but when you are converting already owned property, you are stuck with either more taxes or tax saving it has to offer, you dont have a choice. 

There is a dip in the driveway that leads to said garage and I was hoping to convert to you a makeshift living space for myself.

I'm debating whether I should go through the planning department and convert the SFR into an official duplex with the city.

You just need to understand what your buying, do great due diligence, have a plan incase the lagoon fails (new lagoons, convert to package plant, hook up to city).

Has anyone gone through the paperwork/legal process of converting a Single Family Home into a Duplex?

There did seem like there was a ton of potential in the walk-out basement as I could see an extra bed/bath being converted to it.Ultimately I would just like get him out of this mess. 

I have a few investment properties under my belt (converting primary residences into rentals), but am now looking into scaling up and doing my first partnership on a buy and hold condo, and looking for some advice on how to the structure the deal, especially from an equity/profit share perspective.  

DIY might convert your personal effort into some saved money in the short term, but you expose yourself to a pretty hefty, and expensive, learning curve should you mess something up.A couple articles I might recommend: questions to ask an attorney and risks of DIY LLCs.This isn't legal advice, just my opinion as a real estate investor.

The Tanglewilde-Thompson Place neighborhoods in Lacey are probably the best right now for finding (or converting into) a multifamily home.