Converting a room in primary residence into a rental

So, I was originally thinking of selling the home and downsizing to a smaller home. We have reasonable equity which could be used to pay down the next home. The issue was location. We're so used to this and anywhere else would take some adjustment(not impossible). The other option is to convert one room into a rental with its own side entrance, kitchenette, washer/dryer, full bath ad street parking. That way, the rent would subsidize our mortgage and we're effectively downsizing. As a bonus, we get to keep the existing home and continue paying down the principal. Anyone done this before? This is new for us and looking for advice for pros/cons on this approach. Thanks a bunch