Building department can advise on specific next steps - municpal hearing and presentation of plans will be required in most cases. 

Does anyone have any advise on the area or some good resources?

So if your investing that full $200,000 getting that kind of return and you currently have almost no monthly expenses I would advise you to double down on what your doing and let it ride for as long as you can.

This is what I have been advised so best to also check. 

As others advised, get a structural engineer in there to review the conditions.

Obviously, each bears certain risks, and usually the agent would advise on these topics in the beginning.

Readers are advised to seek professional advice.

I'd first take it up with the eviction court and ask for a monetary judgment at that time.

If he doesn't qualify, advise her that she has to 'cure' the illegal occupancy immediately or be subject to eviction. 

My broker advised me to "bite the bullet" and close the deal, telling me that I should be glad I wasn’t losing money on the deal.