Payments went from $150/mo to $240/mo plus a $100/month add on water fee b/c of a water main break and lots of damage.

In some multifamily situations you see water/ sewage and trash also paid for.

I got a plumber and water restoration folks out there that night.  

I'm considering purchasing two older single family homes that have separate addresses but are on the same lot and same tax and water bill.

This in turn would in turn smooth out your revenue across your whole business a little bit as the insurance premiums should be relatively resistant to an economic downturn. 

PM now is telling me:1) I need to hire an attorney2) I shouldn't contact the tenant's attorney because that would "muddy the water"I am fine if the tenant just pays rent and I can live with the low/under market rent for another year.

Can't blame them for trying.Your on the clock as the the 8th and most state laws require the tenants February rent be prorated to reflect that.For the water damage I would hold the tenant responsible for any deferred maintenance that damaged the property. 

Are they hooked up to city water and sewer?

There was no water leakage in the basement and no humidity at all.

So in the worst case, I'm living for free.Other variables: It's a 1-acre lot that's zoned for multi-family and has enough leftover space that I could use someday for a triplex or just divide it and sell.New roof in 2019, new hot water heater and HVAC within the last 3 years.The utilities are combined so I'd either have to include it in the rent or work out another solution.I think I can get it at $120,000 with either 15% down on an investor loan or 5% down on a conventional mortgage.Taxes: $950Insurance: $1200I would manage it myself for now.In my various scenarios, I either run $1000 a year for expenses for living in the main house and renting out the MIL suite or up to $3000 a year in expenses for the student rental scenario.