To hit on a few points you made - the first around "how long will this last until regulations catch on?"

Since you've lived there for nearly 3 years, the fact that you made the effort to contact the owner may be enough to move the needle.

It's always money to be made!

It's painful man.  

From what I observed there's bigger income to be made with due diligence to find that property, but with big income can come big risks if you're not careful which scares me so much tbh.

One of my places had a little extra room next to the kitchen so we made a dedicated coffee area with a coffeepot, a drip setup, a french press and a pod machine.

It should also be noted that there is often a difference between the borrower and the guarantor.If the loan is made to an entity (LLC, corporation, trust, etc.)

I have dozens of clients doing this in New Jersey most of which come from no construction background, they simply use preferred vendors we have in place (not GC's) which lowers renovations cost because there is no middle man. 

You also make about 80x the profit in this scenario than you would have made renting the property. 

Some allow cash, most require the 10% deposit to be paid with a certified check made out to the referee but there is no verification of funds.