We recently purchased a vacation home that has a mother in law suite with a full time tenant paying rent.

Look at getting a title company report to see if there are any liens or lawsuits on file and making sure you are insured at the end of the day. 

If this is an auction the first would have been named in the lawsuit and should have responded so check to see what their response was.

Are you certain the HOA has no pending lawsuits and enough reserves?

This is where the real estate brokers really earn their money and while I bag on brokers every day in regards to their not representing the buyers I do have a lot of respect for their knowledge in regards to the contract laws and the fact that they always protected me to make sure the properties transferred with no snags and no lawsuits.

Maybe instead of building your own ADU, you could purchase a SF with a mother in law suite?

Keep the expenses in that account so you don't comingle funds which could "pierce the corporate viel" and make your other assets vulnerable in the case of a lawsuit if they share the same bank accounts.

It is all about your tolerance for the potential risk should something happen at one property and you find yourself with a lawsuit.

Pro-tip: Find SFRs with multiple living spaces (ADUs/mother-in-law suites) and house hack those.

We're looking to do everything right but we're also aware that there are lawsuit crazies out there that want to sue you into oblivion every chance they can get.