Will give you the ability to buy with lower DP and lower your living costs.

I tend to recommend some of the secondary markets to the investors that I work with where the growth is obvious and the properties still cashflow.  

Quote from @Kelsey Vander Meulen: RentRedi includes the ability for tenants to submit a maintenance request.

This will provide protection both against the city as well as provide ability for you to pursue eviction if needed. if you rent an illegal unit and the tenant doesn't pay you have no grounds for eviction.

I think the biggest reason for REI losing money on a property is they lack the ability to accurately analyze Markets. 

The ability to purchase a home is near its worst levels since the 1980s.

You could have sent him to collections and this would destroy his credit, which could impact his ability to purchase a home, qualify for a car loan, and possibly even cost him his job.

Midtown and Corktown are also seeing growth, though prices are creeping higher.As for the 1% rule, I completely understand your concerns.

The reality is that the tax impact and ability to take ANY losses (as Michael mentioned) is based on a number of factors that include whether or not it is a "separate dwelling unit".

At some point in growth you'll want to start thinking about Appfolio.