The regulations in Chicago can be quite overwhelming, so I’m looking forward to exploring the opportunities in this area. 

Your definition is correct for "legal non-conforming".The "legal" part of "non-conforming" is dropped when it doesn't apply so most commonly people call these units "non-conforming", "finished", "in-law suite/unit", or "bonus unit".Non-conforming: Any property that doesn't meet current zoning requirements.Legal non-conforming: A non-conforming property that was lawfully established under previous zoning regulations and is allowed to continue its use.Based on his posts @Mario Morales is referring to a non-conforming unit.

Use some for buy and hold (I personally would prefer apartments rather than buying a few single family homes) and some for lending/trust deed investing.In either category, you must know what you are doing, know how to vet the investment, how to vet the sponsor (if investing in a larger fund of some sort), the laws and regulations on the lending side, how to investigate which areas to invest in buy and hold and notes/trust deeds for that matter.So as you have already said several times, lots to think about . . . 

We will continue to have an influx of transplants from high tax, high regulation states like CA and NY. 

There's a to unpack here - preparing the property, pictures & listing, finding a management company, taxes, regulations for the area etc.

There will always be bad actors, you will never regulate malintent away.

Navigating NYC's zoning regulations can be complex @Jon Pflueger, especially in M1-2 districts, which are primarily designated for light manufacturing and commercial uses.

There have been multiple revisions this YEAR alone for state regulations that most leases online will not have updates on. 

For non-primary residences, they have to follow all of the following rules to receive a permit: - the property must be a minimum of one (1) acre in size (designed as a precaution to disturbances)- The building standards of the underlying zone district must be met - Adequate parking is provided - Defensible Space requirements are met - Valid water and sanitation must be demonstrated - No more than five (5) bedrooms are in the dwelling As time goes on, they continue to become more strict on the rules listed above here, and are actively regulating it.

There's plenty of regulation surrounding the STR industry, but it's perfectly legal and welcome here.