Lastly as an illegal unit it is  huge liability if there was a trip and fall claim, fire etc your insurance may not cover.I recommend renters insurance for whoever lives there is mandatory to add another layer of protection. last option not considered is you living in the bonus unit to have a free place to live with minimal risk 

Thanks @Max Emory & @Jake BakerI am in the process of test driving Stessa to see if it helps with improving my efficiency on the property management side, including keeping track or insurance, property taxes, maintenance etc.

The insurance company sent us a letter telling us they will be dropping us for that reason as well.

Maybe insurance will cover it.The property manager can't possibly sit in a rental 24/7 to ensure nobody squats.

I suspect a lot of your buyers to most of your buyers are getting HML  Loans in that case title insurance is for the amount of the loan and if the loan included our fee then they are insured..

A major reason I chose Mark was that his foreclosures are considered very thorough and there are title companies that will offer title insurance right away on tax lien foreclosures that he handles.

., 900 SQ FT is TINY, I live 10 min from there and will not touch it .36k gross so about 20k net, ( MAX ) all in 375k, TERRIBLE deal 4% net , again terrible   Actually, the net will be less, Insurance will be about 10k, On top of the 6kish in taxes, and other items. 

We have been able to rent it out with zero vacancies for $3,300 month, with the mortgage, property taxes, insurance and other expenses totaling ~$2,900.

You're better off just getting better insurance. 

It's also good for insurance and legal reasons, because you will need to indicate every adult and all persons, as well as details (like children, pets, etc.), on the lease.