The builder then pulls down the plumbing, electrical and wall in the massive decks and turns these into illegal rentable suits.

That means a suit was brought and successfully prosecuted.Insurance does NOT prevent lawsuits!

Buy a house like a foreclosure and fix the basement, rent the upper suite.

Judging from the responses you pretty much have all you need to hit the ground and start searching. 16 months ago, it took me 6 months of sometimes painful grinding to locate a duplex suited my needs in Los Angeles.

Although I see why you are curious about its effects, inflation adjusted IRRs are not generally used in a commercial real estate analysis (especially given the current low-inflation environment).

This would give an effective APR of about 9.5%.

This will give you a full suite of solutions to offer a motivated seller.  

I was watching Eddie Speed video and he said something to the effect that he used $100 to open up a ROTH IRA and used that account to buy a $70,000 note.

Do you have any advice around how to most effectively collect rent on late tenants?

My mother handed me Rich Dad Poor Dad in 2000, when I was only 14, from then on I always new that the proverbial rat race wouldn't suit me well, and in many ways it transformed my financial acumen moving me from a non-investor to a passive investor at a very young age.