What’s worked well for me in the past is simply having a conversation with the tenant.

Best advice - learn as much as you can about subject to transactions (both good and bad) and then have a good open conversation with your friend and you can both make an informed decision together.  

I am currently looking at purchasing a SFH with the intention of turning it into a top/bottom duplex and here's why:1. I have already talked to the city and they are fully on board and are excited to see more housing ...

If you want to remain friends with this old buddy and not go another 15 years with out seeing him I would just let normal conversation happen about each others work and personal life, and when he is ready to jump into ownership he may or may not request your input or assistance.  

I know it was mentioned earlier, but you really need to have the conversation with your CPA.

I would love to have conversations with anyone willing to share advice!

A boiler central hvac conversion for example in a good asset class is something that would get better tenants however they are extremely expensive. 

If you can figure out where you want to invest, have an honest conversation with them about how you want to get started. 

You are probably looking at $40K+ to start the conversation. 

I expect to see some kind of conversions down the road or some type of zoning changes to allow more interesting things to draw people back downtown.