And they ran an extension cord from the house to the shed and have an AC unit and cable in the shed.

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. 

I am in the stage of finalizing the plans before sending over to the city.I am contemplating either a 1Bed1Bath with patio vs 2Bed1Bath with no patio extension.

I think of having your license and being able to help guide others as an extension of personal investing and vice versa.

One of the unit is occupied by a national known sandwich shop (corporate lease) - this is 17% of total space and they are in the building from 2006 and their lease is till 20262. 53% is occupied by a (local to state) bar and grill - their lease started in 2007 and expiring in 2022 - next 5yr extension option with 10% increment. - They have around 25 - 30 locations in the state.3.

You can tell from the timeline mentioned, that there have been alot of delays and extensions with this deal.

I have done extensive research on it but want to speak with someone with experience in the area house-hacking or purchasing small multi-family in the NC state/Raleigh area.

I have done extensive research on it but want to speak with someone with experience in the area house-hacking or purchasing small multi-family in the NC state/Raleigh area.

@Logan ClarkUsually, you can get an extension from your hard money lender. 

It would still require legal action and would take time but you would not be up against a possible extension of the eviction moratorium.