I collected rent (with increases ) for those 4 years .

Then comes collections.

Assuming you do not get whacko judge, the unpermitted unit has no impact on collecting rent or the eviction process.  

They have a mental list of hard to collect rent addresses and they may help connect you and the owner. 

This is an exception under all insurance policies so the next question is even if successful with a claim how confident are you to ever collect from this seller without insurance cooperation? 

Being a homeowner (especially in your area) is impressive. 

You need to decide if you'll forget July rent in order to collect August rent.

Also in terms of collecting rent, would I need a lease agreement, and account for this during tax season.

Im paying X on the HELOC, but collecting XPLUS on the note. 

I us a property management app to receive less phone calls from tenants and collect less rent in person.I am trialing a couple others, I will be glad to let you know what I decide to go with if I find one better.