Both properties were once (most likely) SFH that we’re converted.

If I were to expand upon the main house and make it 1400 sq ft, which is definitely doable, would I then be able to turn around and get that section closed off and convert it into a 500 sq ft or less JADU?

Sometimes a tenant will want 3 years fixed but not as desirable to the landlord unless the landlord knows they are tearing the building down or eventually replacing a mom and pop tenant with a national one.You might want to take your existing lease and any amendments and have them reviewed by a local to the property  commercial real estate attorney familiar with that asset type (industrial, retail, etc.) and give an opinion.

The lender says he can’t legally lend on a single family with two kitchens and the owner doesn’t want to convert. 

There they will tell you the requires to convert to a multi.

It doesn’t happen over night but it will eventually happens if you stick to it.

Hi Michael,If you are converting a standing structure (garage or splitting current home into separate units) the costs will be much less than building a new one, and with some handy work and sub-contracting yourself you can save a lot of cost. 

Also home offices haven't been a red flag in quite a while since now so many people work remotely.ANDHaving a home office increases the qualifying deductible miles you have substantially since it converts drive time from home to REI related things from non-deductible commuting to deductible miles. 

All else aside, given the amount of rent you could be charging it may be an idea to sit down and develop a long-term (2-4 year) budgetary plan for the unit/complex so that you can 1)gradually increase rents to a more uniform standard--as one member stated, "if they are all comparable units, there shouldn't be a drastic difference in the rent amounts" 2)eventually get all the units with equivalent or comparable upgrades (to keep things even with the neighborhood comps based on ammenities), and 3)ease your mind about the financial plan and trajectory of your complex (so you can just follow a predetermined plan and adjust when needed as time progresses).

Hopefully we’ll cross paths eventually.