@Matt M. Think: who is going to buy the property? In my area, a duplex is a solid investment and is attractive to a young person as a first purchase to own and live in. It is also preferable to someone wanting both units as an investment property. But in California, where prices are steep, diving the property is the best way to make it affordable.
Is it a condo? Townhouse? Does each unit have a different parcel number? Okay, this is getting detailed but the title must be clean and appropriate to have a successful sale. To sell as two separate units, legal work may need to be completed.
Why do I bring this up? Because one needs to know everything in order to get the best return on the investment. As a contractor, you are bringing in the sweat equity, but maybe not the legal aspects. Market it the best way to NOT take a haircut. What will your costs be to improve the building to a marketable condition, add profit, transaction costs to sell the property, and see which options will market the best.
@Matt M. I find myself thinking through similar things on properties I own. Generally, you will make much more money by selling a single unit to a first-time homeowner using some type of government financing. The downside is, it takes longer and they want every little thing fixed. I recently had a buyer ask me to 'inspect the air ducts to see i they needed cleaning' for instance.
This is a bit of a personal question. If you can put up with the BS of selling to a first-time retail seller than you should absolutely do that because it is more profit.
If you can get a great deal on the other side, do so but not with the intent to put them together because that will make them worth less not more.
By the way, why sell at all? Seems like a smoking deal if you paid $37k and rent for $1205/month. If you need cash to expand just keep it and borrow some money on it. Just don't get greedy an borrow to much. Make sure the rents easily cover the debt service.
Buy it by the bottle and sell it by the drink .