I would then follow up with the upstairs tenant and let them know that I had issued the offending tenant a written warning about the behavior.

Most are fine with that, but a few will have problems with it and claim there are legal issues, etc..

Most of the lenders I work with don't even issue LOIs as they are meaningless. 

Hello biggerpockets,I am trying to understand all the potential *legal* issues I can run into by trying to split a regular single family home that is zoned as such into essentially a duplex with 2 separate tenants, one living in the house and the other in the basement.

If after appropriate investigation, it appears to such officer that the proceeds from the sale of the property would be insufficient to wholly or partly satisfy the lien of the United States, or that the claim of the United States has been satisfied or by lapse of time or otherwise has become unenforceable, such officer may issue a certificate releasing the property from such lien"Locate the "officer charged with the administration of the laws in respect of which the lien of the United States arises" from the lien (a sample is provided here for the property I was researching - Assistant US Attorney Erin Secord) and contact him/her in advance to find out what information they would require from you if you win the bid.

I don’t like providing  blanket SF costs as there are scopes that differ depending on the home but it’s very difficult to complete a gut renovation on a 2,000 SF home for less than $200,000 if you’re pulling all proper permits and and not cutting corners.

In parallel start talking to other potential candidate GC’s to see what their costs and schedules would be like (make sure you ask them how hard it is to transfer permits).  

"MOTIVATED to solve their issues".FACEBOOK:Now, take Facebook. 

There are many CPAs here and many investors who think they are CPAs.The key issue to understand is: you cannot create any tax losses from renting rooms in your house.

I collected OVER 100% of rent during the pandemic and had no issues with evicting anyone.