Don't rent to family or friends would be a good start. Don't over improve the property.
@Peter M. AMEN. A diff perspective on that though- for investment properties I would never rent to friends and family. In a property you live in (I house hacked for years), you're not just managing the property... you're sharing it with your tenants. So make sure it's someone you like being around, you have to co-exist with them.
Add value, if needed by renovating the kitchen, bath, painting, flooring, etc. Make sure the market demand is there for what you do. Many people say not to over-improve, but often going with nice finishes can yield really good returns, especially in the right area.
It sounds like you are speaking about a duplex. This will be valuated based on comparable homes in the area rather than strictly NOI (by the bank at least). You have the advantage of living in the area. Take a look at the comparable homes in your neighborhood and the neighborhoods nearby. What are they selling for and what do their interiors/exteriors look like? Do a cost/benefit and see what you might be able to get.
The other way to drive value (although not exit price) is to increase your rents to market. This will increase your cash-on-cash yield. I realize that your situation is different because you and your family live in the property.... but, if you or your sister ever decide to move out, you can do a similar comparable analysis on market rents.
Hope this helps. Feel free to PM with any questions.
Hi @Gabriel Feliciano - Great job on convincing your wife to house hack! My sales skills weren't good enough to make that happen lol.
@Jacob Avery did a great job explaining your different options (What's up Jacob!). Any multi under 4 units is valued based on the comps in your neighborhood. See what level of renovations they have and see if it makes sense to upgrade.