You should ask for the leases and read them to see what exactly you are inheriting to better understand what you are on the hook for.As far as the past due rent, not sure why the owners think that you should be on the hook for them not enforcing a lease agreement properly, but maybe you can make a deal with them that passes on the $200 per month as long as he pays it. 

After that year, we had two rental properties that each cashflowed $200 per month and we didn’t have a single dime of our own money invested.

Understanding each area will vary, what would be the average or reasonable amount of investment per unit for budget considerations?

Also, my understanding as per my attorney, even if you buying at an HOA foreclosure auction where they set the minimum bid lower than the judgment, the buyer is still responsible for the difference....HOA debts stay with property regardless. 

The average rent per room ranges from $1700-2050 in my college town.

There's many ways to jump in, this is just my 2 cents on getting started. 

If it's $5,000 per unit.

If you think you can get $125 more per side that comes to $3000 per year (125 x 2 x 12).

Keep in mind, with each draw you have to have the funds wired into your account which is typically about $200-$250 per draw in my experience.4) Can you describe what type of things could go wrong with GC financing?

We discovered that very many of those locations had really strict restrictions for STRs, such as can only rent one time per year and must be at least 30 days.