They said that kind of project would basically convert the property to an apartment building and requires R6B zoning.

You’re basically paying a music teacher that isn’t as good as you. 

It seems like your ROI is basically the same in each option, but you are taking on a much bigger project to convert a single family to a four-family.So basic calculations, since we don't have a full financial picture, i.e. what does financing of each look like?  

I basically got these homes for free without using any out of pocket cash to scale up.

Things like landscaping/snow removal and labor cost for repairs are going to be highly variable based on your market so you'd need to do your own research on the going rate by either talking to other local investors, running your own google search, or exploring basic services on thumbtack/angies list etc. 

Quote from @Andrew Syrios: So basically note investing is really trashy and you're looking for a continuous stream of income but instead of alimony or child support it's loan payments instead? 

These are examples of how you could still be comparing apples to oranges focusing on safety and cash flow alone.

I have to close, apply for a conditional use verification, get inspection ( requiring wired smoke detectors, other safety features) and get a business license.

We provide basic cable with sports channels, or youtube TV, depending on the location. 

They'll usually jump on your suggestion because it is so much easier to sell the note than get the process of a short sale through their system.By purchasing the note to the property you basically become the bank.