Rent, Sell, Convert to ADU?

[Jennifer B.]

We're looking for help in deciding whether to sell or rent our previous home in SW Portland. We're currently living in Beaverton because we needed a more accessible home because my mom had to move in with us, plus a better commute since I work in Beaverton. We're hoping to get some thoughts from anyone, but would really love to hear from folks familiar with the Portland market. Stats on the house:

• PITI is $1,864.
• Valued at about $475K with $250K still owed to the bank.
• 1500 square feet, 3 bed, 2 bath on 2 main levels, nicely remodeled with views of Mt. Hood and downtown, plus a 600 square feet budget finished basement with full bath - basement not currently legal living space.
• Located in SW Portland on Marquam Hill between Barbur and Terwilliger, just 1 mile south of downtown, walking distance to OHSU and 1 block to the bus line.
• It was built on 1908, and is a unique old PDX situation in that there is no street running in front of the house (the original street was vacated when Barbur Blvd was put in). Imagine a flag lot situation where you have to park on the street and walk downhill on a sidewalk past 2 other houses to get to it. Difficult access when dealing with renovating, etc.
• Great location for access to OHSU and downtown though.

Here are our options:

1. Sell as is and use the proceeds to invest in a small multifamily - duplex, triplex or fourplex.
2. Invest about $50K into making the basement a legal ADU. Then rent out the upper portion as a 3/2 for $2500 and the basement as a 1/1 for about $1000 per month. Making the basement a legal ADU would require removing the concrete and digging the floor down some to get to legal ceiling height,
3. Another option would be to make the basement legal living space with less stringent permitting requirements by legalizing the old basement stairs -- not sure how much that would cost -- guessing 10-15K. This would add 600 square feet of legal living space to the house, but it wouldn't be an ADU. We would still probably sell. I'm not sure how much more we would get for it as a rental. There aren't any single family homes for rent in our area currently.

The ADU option would require our getting a loan for the 50K to get it done. We're currently carrying 2 mortgages and have a kid in college so it would be somewhat of a challenge for us financially, but doable.

What do you think? Thanks in advance for your responses.