Building an inlaw unit for rent

[Chris Penny]

My house in Union City (East Bay) has 3 beds/2 baths of 1340sqf + garage on a land of 6000. Recently I've been thinking about building an in-law unit of around 600-700sqf with private entrance and put it for rent. The last time I asked (around 6 months ago), a constructor told me it's about $100 - $120/sqf to build, so roughly 80K for the unit. With the construction price getting higher and higher, I'm not sure how much it could be now. Anyway, based on my research, I could rent out the unit for at least $1500, quite good rent-to-value ratio. What do you think about the pros and cons of this approach? 

Another question I have is if I just rent out the unit, how depreciation is calculated? What about I buy another house and put my whole current house for rent, do I get depreciation as my house is now considered as a full rental property?

Thanks