At least one habitable room in the dwelling must have a floor area of at least 120 square feet.

So as an investor, make it a habit to check the auction sites as well as the MLS. 

Once I got it habitable, I had two buddies (really friends of a friend) move in with me.

And starting off, please don't get in the habit of saying I bought a property 25,000 bucks below the FMV as that is not the case, but you may have purchased below the ARV, hopefully.

I can't find any habitable multi-family homes in Chicago (at least the nicer neighborhoods) which follow the 2% rule.

In Boston you would at least double that price and rents to find a place that was fit for human habitation, and that would be a deal.Since you mentioned guys moving operations to CT I will assume you are closer to Springfield?

$3800/mo for barely habitable student apartments?

My friend Mike has 50+ F+C houses, including two designated as "sushi houses" (I share that same expensive habit). 

I've had some experience with renovations (habit for humanity, family members that have built their own homes, personal projects, etc), but risking the solvency of my investment on it seems like the wrong plan.

Make an offer on what makes sense.Once you get the property, you can either move in to the place (if it's habitable) or stay in the hotel/corporate housing where your contract is.Spend your evenings working on the place and cleaning it up.