I am an insurance broker in Colorado and can confirm that most insurance companies are increasing to minimum 8% deductibles on most condos.   

are rent increases realistic?

It would seemingly also increase what I could get for rent, has anyone found that to not be the case?

There has been an increase in gurus selling seller financing training programs because interest rates have risen.

Madison is also poised for larger developments where you can rezone land and increase density.

The increased depreciation deductions can offset your taxable income, including gains from the sale of the previous property.

I normally just do new construction on these pemb, so I have never done an actual modification of an existing pemb to increase the square feet. 

Rental income would be $12-14k per year, so your netting $1500-3500 the first year before lowering the interest cost over time and increased rent (rising at 8% per year).So for $0 out of pocket you get another unit, equity growth(over time), income that grows and you created a unit of housing that didn't exist before.

I personally recommend looking into the Columbus OH market - good population growth, lots of job opportunities in a good mix of industries, and strong rental demand.

Instead of increasing rent, I would look at having the security deposit increased to protect against wear and tear.