@Colleen Fiumara A rule of thumb I use is based on a 30% return based on the total cost per unit.

You may want to add addendum's and rules and regulations as part of the lease also.

First step if you haven’t, even if zoning would “allow” 4 lots is to look at minimum lot sizes along with setback requirements from the streets and lot lines, among any other restrictions, to see if 4 houses could “fit” into 4 subdivided lots.

The framework problem is completely separate issue which has nothing to do with her or her month to month lease ... as long as you have her proper notice that you would not be renewing her lease again then you shouldn't have a problem BUT section 8 might have different rules which I'm not familiar with.

@Anthony GaydenI do have a little motivation in the fact that it is the "Golden Rule": Treat others like they may have secretly hoarded $9Mil and have nobody to leave it to.

Nothing I’ve seen on MLS comes close to the 1% rule though... just don’t want to throw away rent for him.

(Part of this was timing since the existing lease was coming up on its expiration).2 - As others mentioned, make sure you understand the rules of the program and educate yourself ie. annual inspections are required, need to use the same lease terms as other properties, rent increases may need to be approved by the housing assistance administrator well in advance, etc.

Investing is all relative...for example, I'll take a B-class property that breaks even every month over a C-Class property that cash flows $600/mo. because it works better for my plan and style...the point is that any rules about returns are crap. 

I would recommend checking the USDA website to check their mapping restrictions.

Especially if purchased in Chicago where the rules are more relaxed and I can rent out basements.