I live in San Diego and it's practically impossible to get a good ROI. 

There are no real wholesalers in the group, and very few people doing free and clear transactions, at least that I know of, and the average level of the knowledge about real estate of any of those "Bid Dogs" attending the masterminds is very low, or almost non existent, as most of them are new members.Phil preaches that they are experts because the know just a little be more about real estate investment than the average guy, but the reality is that is all smoke and mirrors, and they feed and prey upon people expectations to improve their lives, creating false expectations about people being able to make money the easy way, with no credit or money to start with.

Plan is for year-round STR, conversion of 1/2 the garage to ADU to double heads-in-beds and add flexible living space too.

If there's a hole, it may be a red flag.b) sensitivity analysis: I examine all the assumptions, and make sure I can live with the worst case scenarios.c) "Stall and see": if they are getting money over multiple years, and there is no penalty for investing later, I would usually wait so I get some real performance data, versus having to look at theoretical pro forma information.d) Recession stress test: I will not invest in anything, until I subject it to recession level stress and see if I can live with the result.

I am new to BP community living in the suburbs of Richmond and investing around this region since last 5 years.

I lived in Muncie for 5 years attending BSU.

Should the focus be on completely separating the living spaces right now?

As long as you provide a safe and compliant living space you are a going to be a good landlord.

I live in Spring TXfor reference my mortgage, taxes, and insurance are $1840 each month, $385 per year in HOA fees 

If you live in one unit and rent out the other, you can break even or even have positive cash flow.