Here's the City link for you to reference. https://www.chicago.gov/city/en/depts/doh/provdrs/homeowners...1) ADU regulations specifically exclude Short-Term Rentals so don't do it if the intention is to short-term rental. 2) The ceiling height oh 6'10" is almost guaranteed to trigger digging a basement if you want to formalize as an ADU unit, especially if that height is further reduced by pipes or HVAC. 3)Ingress/egress is an issue for renting, as is that any bedroom also will need two (ie operable window/doorway).

Have you taken the time to search AirBNB and VRBO in those specific areas to see how many STRs are operating?

The other is a smaller operation which does a lot of business in the specific neighborhood the house is in.  

By year three, I aim to cover all operating costs and, by year four, to generate positive cash flow.Experienced investors say it’s crucial to persevere through the initial challenges while gradually building credibility through positive reviews, and I believe them.

You also need the operating cash to do rehab.I say this because you mention FHA and low money.

I would focus my attentions here and try to stay local (within a 4 hour drive) as the POH rentals require more engagement.Financing is a tough deal... but sometimes you can find those Mom and Pop operations with quite a few POH rentals that will work with seller financing on a reasonable interest rate with a balloon within 5-7 years. 

If you would really like to explore the sector : why not go and message 10 to 20 operators and offer to look after their property or clean their property for a month in exchange for their knowledge and details on the numbers.

Each should be able to operate on its own.

They'll probably also want to be sure that you are competent to operate the property afterward, because their reputation is tied up in who they do business with, and it's bad for everyone if the property becomes devalued.

I also broker ALR's in Colorado, and create deals in which I connect operators with landlords looking to lease option the properties.PM me so we can connect!