Also, it sounds like you are in a great time of life to rent to roommates - I don't think you would regret figuring out a way to do some sort of house hack like that right now!  

Regarding house hacking, great strategy when young and can take on roommates. 

(They are hoping to find a third roommate soon) They haven’t got jobs and don’t have enough savings, so we ask for a co-signer.

If you live in the illegal apartment, and it's separate, then what you've done is use an R-1 (single family home) zoning as an R-2 (duplex), and since that wouldn't be legal, the tenant may be able to successfully sue you for renting an illegal unit - even if you are in the illegal apartment - just because it's not legal to have 2 separate apartments on that property.I'm wondering if you could somehow rent it as a roommate situation, though, and get around that.  

Especially if you are going to house hack, if you earn $50k salary on a W2, you can likely buy about a $200k house (yes you need savings for down payment, so that ramen life, keeping the college, paid off car, and living at home, if possible, or with as many roommates as you can find will all help).  

Whether its roommate, GF/BF, husband and wife, if they are both leaving, no matter the circumstances, we put both names on the check with the word "AND".

Personally, now that I’m middle aged the thought of continuing to share my living space with roommates has lost its appeal.

Most are not willing to have roommates.

That way, if your friends move out in the future, you can still get rental income without having to find a new roommate to live with you 

College students may appreciate a quiet study area or a place to visit with guests while their roommate studies in the apartment.Maybe there's a need for a coffee shop or other small business that needs very little room but also provides a service your tenants would be interested in?