You can be charged with wrong doing up to 10 years after you buy the property. 

The fact that they haven't been caught, or are unaware that what they are doing is wrong does not change the fact. 

Re-accomplish a new inspection so to rule out any wrong doing.  

@Juan Alvarez I don't think they have a rehab loan like that of the 203k, someone can correct me if I'm wrong. 

From experience, even if the tenant is in the wrong do you think they have $10k or even $5k laying around to pay for the repairs?

The only way I would report anyone is if I had clear evidence of wrongdoing.

If you use your own money, will you have any left in reserve if something goes wrong?  

Depreciation - assuming the entire 1.5M is depreciated over 27.5 years means ~4500$/month that I can deduct from my income for federal tax purposes - so would need to multiply by my federal tax % to get an actual $ saved value (im a little hazy on these things, so please correct me if im wrong). doing so doesnt make this a cash-flowing deal with a mortgage, and still wont crack 5% ROI if i buy in cash.finally, here's a link to the biggerpockets calculator for this - https://www.biggerpockets.com/buy_and_hold_results...So, is this a very unattractive deal or am I missing something here?

But, hey, if someone wants to prove me wrong, do so with a fully executed purchase contract and make an "I told you so!"

If nothing else, you helped a couple people out and you can't go wrong doing that.