In this way I will have more opportunity to rent it out to a family. 

However, this home is in Berkeley and I am concerned about destroying historical elements and potential added structural engineering costs that could make the house attractive to a buyer in future years, along with the opportunity cost of construction now versus getting rental income from the house in the next few months. 

We have 3 single family rental homes right now, and we recently got the opportunity to buy a storage facility completely seller financed.

That being said, you reiterate numbers that you can accurately portray and stress your worry as you do here in potentially losing the investment opportunity.

Sounds like a good opportunity to increase cash flow there.   

Get your name and face out in the public this way as it is pretty cheap to do and gives you an opportunity to learn from others and build your network.

And keep the rest of the cash for 1 more rental, our self, for emergency funds, and too spend some wisely ?

The thing you must recognize is that major issues like this present opportunities as it scares the beginners and even some pros away.

I feel the city is listening to owners (and short term/vacation rental managers like me) but those who want to protect the future of neighborly, well-run, and profitable STRs in Colorado Springs do have a short window of opportunity to speak into this document before it goes to city council so it's time to get to a meeting and share your perspective. 

When the market saturates, the investors find new opportunities.