Any phrases such as "finished basement or attic", "in-law suite/arrangement", "seller nor listing agent can confirm the legality of the basement/attic unit" are a few common ones.

Below are the key data points:- Gross Rental Income: $118K (I received the rent roll list from agent)- Effective Gross Income: $112K (I'm assuming a 5% vacancy factor)- NOI: $56K (I'm assuming 50% Operating Expenses - inclusive of 10% property mgmt costs, repairs & maintenance and CapEx reserves)- Recommended PP: $623K (Market CAP rate is at ~8%; I used 9% because I want the Cash on Cash return to be 10%+ with a 30% DP at 7.2% interest rate and 30 yrs term)- The asking price is $1.25M.

He confirmed my assumption that the estimates on Zillow, etc. are pretty much junk, that they will regularly be at a minimum 5% off, sometimes much more, and that what he has seen in the past is that new investors have based their numbers (purchase price, rehab budget, etc.) on these inaccurate numbers and what started off looking like a great deal, turned out to be a bad deal for them after the actual comps,  inspection, and assessments. 

That is why my rule of thumb is 6 months reserves for each rental.

There are a ton of things you should check, but here's the most important thing to do FIRST: Get referrals of recent clients and then check them thoroughly.Whatever you're told by the lender, confirm it ALL by speaking directly to the last three or four borrowers.How easy was it to get approved?

Just as a reminder in addition to the interest rate, amortization schedule and fixed period of the loan, inquire about: 1) Prepayment Penalties (In case you want to refinance in a few years), 2) Possibility of Rehab Funding, 3) Reserve Requirements, 4) Personal Guarantees, 4) Rate Adjustments (i.e. at the 5 year mark) to understand other variables in the loan product that works best for your project.

Do you think I can bid at the sale and if confirmed get clear title?

We investigated and confirmed, then gave the tenant 30 days notice of termination. 

The whole process is not for the faint of heart, and you must have plenty of reserves just in case need to hold it for a while, have a lot a work to do, or be willing to move on it quickly for a loss. 

If you didn't notice the rent wasn't paid for 2 months, it is probably because you have good reserves.