Repairing exterior of carriage house

cellophane

The garage / carriage house on the back of my lot is in a miserable state of disrepair and I'd like to start planning out how to repair it. The long range plan is a total gut / remodel to make the upper level a small studio apartment so any repairs now will hopefully be simple and cheap - basically a big band-aid. However I do want them to be of some quality, siding over already rotten wood doesn't accomplish much imo...

Structure is 2x4 with multiple layers of siding materials installed. My gut reaction to it is to totally strip off what is there and replace it with OSB, a paint on water barrier and some variety of siding but I'm worried that might be overkill given that I want to totally rework it in a few years. What other options could I investigate without spending a fortune on it? The work will probably happen in the spring as the temperature seems to be parked below freezing for the next month or two.

Bondo

Ayuh,... It makes more sense to me to have a Plan,+ do it Once, rather than any Band-aids...
Do your rebuild/ remodel in stages, as you can afford it,...
This could just be stage 1....