How do you get the funding to cover the entrance fee plus the rehabbing.

They share a common entrance, but have their own bathrooms, reception areas and are subdivided into 5-6 individual offices per larger unit.  

Was entrance without notice to the yard only?

In our county the Note to Pay Or Quit has to be hand delivered or posted on the entrance the tenant uses mostoften.

Look for homes that already have a in-law suite with it's own entrance or even a guest house.  

You need to establish your exit strategy as part of your entrance strategy.

Recently I've been thinking about building an in-law unit of around 600-700sqf with private entrance and put it for rent.

Oh -- and sounds like a great rental, with the mother-in-law-attached assuming it has a separate entrance, or you could easily create a separate entrance there.

The basement was unfinished when I purchased it, but it had a separate walk-out entrance and a half-bath. 

v=YitQQJrksYI "How to Soundproof Ceilings Between Floors" This video will give you an idea of how to sound proof your ceiling(best to use 5/8 drywall), also depending on your city codes you might have to have a fire barrier doors for your entrance and of course in any home at least 2 exit points and a window in the bedroom (or you can do a studio style apartment layout to get around that if it is too expensive or not really possible).