This is the low end of a hands off ADU other than converting existing living space.The more sophisticated value add people are still leveraging non-optimized zoning. 

Be brave and step out of your comfort zone. 

Most planning or zoning department have a pre-design meeting where they can walk you through the city process if you don’t know it already.

If anyone is interested in sharing knowledge about real estate in general (or the US East Coast market), comment and we can set up a Zoom meeting - preferably mornings or early afternoon ET time zone as I am in London! 

For example, often fire damage is water damage--they put the red stuff out with wet stuff.

I'd recommend checking out Red Rocks Credit Union.

That huge difference between rent and price is a red flag.

The trap is that newer buy and hold investors sometimes calculate cash flow as scheduled income less PITI and end up in the red as soon as anything happens. 

If the basement was unfinished when you purchased the house, it would have been easy for you to ask if a permit had been pulled for the partially finished  portion. or to check with local zoning.

Your real life example was done in a red state, pre GRC/DF, Safe Act or both.