Sometimes neighbors are able to observe and see things that the PM can't. 

I would agree with all of the parties noted above and have similar experiences and observations.   

My father was a part time investor and did a lot of work himself which I observed since age 9 so I am relatively handy.

I have no stats to back any of this up, but it's my best guess/observation from 30 years in the biz and having bought hundreds of foreclosures.

To which you said: "I’d agree that there are more “bad apples” than good ones"I suppose you agree with my hasty generalization...lol If there are more bad apples than good, an investment vehicle can and should be generealized as dangerous by a rational observer :)  

You may be able to do this step yourself and observe if the illegal occupants leave.

@Ben KirchnerI'm in the middle of this transition - I have actually modeled my investment strategy exactly like the game of Monopoly - I spent the first several years acquiring property - I would buy everything I could ... that started out with lower end, cheaper properties - then I moved up in class and sold some of my lower end stuff .... currently I'm selling several to move capital to apartment syndications - I plan to "observe" the apartment business and learn the ropes (a different world from single family) while investing in syndications - then buy one of my own... but I may just keep my money flowing into syndications in the future... the passive aspect seems pretty attractive.Good luck and Happy Investing,

just an observation. 

Asking questions not only about their realized returns but also observations regarding a sponsor’s communication skills may provide valuable insight.

Great observations, I'm not sure where she is on the path toward foreclosure.