You gotta get outta the comfort zone and bonk contractors heads to get the projects done. 

Hey @Bryan Findlay, it depends on how comfortable you are with the cash flow under that scenario.

If they stay after their lease is up, that will be the problem at hand.So if they are "squatting illegally", how should one proceed in my shoes?

How comfortable are you with long-distance investing? 

If you aren’t comfortable making those decisions, then being a rental property owner may not be the right choice.

The first step is just doing it and now I'm comfortable enough to try again.

I suppose I would if I found/create the right deal, but I haven’t found anything as of late.Some of it is personal comfort level.

The fact that it was suggested by your CPA who knows how you look to the IRS better than anyone would give me comfort if I was you.Bottom line for me is that one should never do something you know to be wrong just because you'll get away with it. 

I could also rehab the vacant unit first, then let the tenants stay there to make it more comfortable for them while their primary unit is fixed up.

You just have to think about comfortability vs profitability.