Going from 1-2 may be a lot easier but when you start adding more than 2 and depending on how high the structure is you get into fire escapes, sprinkler systems etc...The more important question you need to ask is not is there a market for this but can I legally make a 2 unit within the local building codes and keep it financially on point so the project will still be profitable when completed

Creating a gain of another $6M, but this time he gets to enjoy that completely tax-free.

I'm going to suggest you also look at areas surrounding TX 99 [Grand Parkway] including areas on East side between 69 and I10 where it is planned but not completed.

We've recently completed a similar portfolio purchase of contiguous duplexes like this. 

However, with the SFH, I could buy 1 (if not 2) in cash so I have complete cashflow coming in rather than a mortgage for 15 years, for example with the MF which will eat away at the cashflow. 

I would do a complete inspection and make sure they didnt do any damage there and have them sign a waiver of liability since they are working there.

I walked the property with a contractor and understand a permit will need to be pulled for the work but one thing we weren't completely sure about was adding an address to the building.

Many of the families living here are honest hard working people, it will take some time and money for it to come around completely but I have faith it will happen. 

I plan to get a 30 year commercial loan and my broker is telling me that 6.5-7% is more realistic for an interest rate using a complete underwriting process (3 years tax returns and credit check).

Both solutions seem a bit overboard for a 16 unit operation but the software did have mobile apps to complete the inspections with.