I can't find any habitable multi-family homes in Chicago (at least the nicer neighborhoods) which follow the 2% rule.

In Boston you would at least double that price and rents to find a place that was fit for human habitation, and that would be a deal.Since you mentioned guys moving operations to CT I will assume you are closer to Springfield?

$3800/mo for barely habitable student apartments?

Networking in real estate investing is vital so don’t be daunted and go to the events!

It is vital that you have a high-level of trust in a relationship and this is a prime example of why you should never take anything on faith.  

My friend Mike has 50+ F+C houses, including two designated as "sushi houses" (I share that same expensive habit). 

I've had some experience with renovations (habit for humanity, family members that have built their own homes, personal projects, etc), but risking the solvency of my investment on it seems like the wrong plan.

(just one of the many reasons yearly inspections are vital!)

Make an offer on what makes sense.Once you get the property, you can either move in to the place (if it's habitable) or stay in the hotel/corporate housing where your contract is.Spend your evenings working on the place and cleaning it up. 

The lender is a local bank who is very conservative in their lending habits also.