The factors here are several layers deep...1- The threshold decision is rooted in local ordinance and zoning...if you're in an area with tight local ordinances you're fighting with the people that live in the neighborhood before you ever reach the city zoning folks...this can go one of many ways2- ROI on the conversion...you're first stop should be with a local architect...they are worth their weight in gold when navigating a project like this and will wade through the regulatory waters much better than you...and a simple phone call may be telling to whether the conversion would be permissible.The extension of this is the cost of the renovation in relationship to the rents received...the stars would really have to align to say you should spend a significant amount of cash to convert a performing building with 4 revenue streams to serve another function (but there is more to this)...and the cost of construction (and lumber in particular) is 5 fold what it was 1.5 years ago...3- As you indicated...exit...I think the only rational reason to convert a 4-unit would be to get condo status or single family/ shared wall and sell one or both of the units to an end buyer (you are basically paying the role of a speculative developer here)...this is happening frequently in locations like Olde Towne East and Merion Village...hard to demonstrate how successful this has been, but it seems far fetched reasonable consumers would pay the same for a  free-standing SFR they would for half of a "duplex" or condo, but who knows for sure.Either way you look at it you're in a residential appraisal situation on the comparable sales approach....4 unit buildings are still "single family" homes. 

Maybe all you need to do is ensure it's clean and functional?

A fully functioning arcade with 20+ arcade machines, 5 pinball machines, a handful of skeeball air hockey type machines and a retro gaming area.

Visual observation was otherwise positive – the one unit he could see, seemed in ok condition, no obvious damage or other major structural issues, area was up and coming C+ next to a B neighborhood, a park and school were within walking distance.

I am a new investor so forgive me, but what are these systems’ main functionality/purpose?

In a voluntary, free market, we want to make things functional and beautiful so people WANT to stay there.

You can operate and function more freely and make more money in other ventures with a clear mind.

Remove one of the functional kitchens from one of the duplex units, get the property reappraised as a duplex and hope the second appraisal does not drop the value too significantly from the contract price. 2.

. A non-cash asset you have access to is high functioning individuals with high wealth that can help propel you into your future.

They're focused on the day to day, we focus on managing them and making sure the property continues to function as expected.