I wish i heard of house-hacking about 15 years ago, but right now it's probably not the way to go for us as our family would require more space than a multi family would allow.

And going from 3-4- bedrooms just doesn't add value (especially if the space is already there just not finished).Sell and take the money tax free. 

Would like to sell individual live/work spaces as white boxed condos. 

I think a big portion of that is because of the land issues that we have, and there being a limited number of spaces you can build around city centers.

Properties with existing separate living spaces are grandfathered it. 

Now they have enough global cash flow and equity from the properties to keep getting lender loans even if their income is not that high maybe 80k a year or so.Then there are the doctors, tech space people, etc. that make very high incomes.

Smaller has higher occupancy, less rate fluctuation; bigger has a lot more rate fluctuation AND occupancy fluctuation, but you make bank in the high season and in the 4+BR space your ROI is typically better than the smaller ones that are more consistent.  

In the meantime I can make the garage into a duplex or live/work space to rent on the back of the lot I retain? 

The properties that I rent would be fully furnished and then listed on short term rental sites such as AirBnb, HomeAway, VRBO, etc. as available spaces for travellers using these platforms.

I would recommend learning as much as you can about the real estate space and see where you can best fit in based on your strengths and current situation.