However, if conversion isn’t possible the monthly payment is not a desirable payment to be stuck with.There are other multi family units on the same street so I would imagine it is not impossible but I am concerned about how long it can take/costs of doing so.

You can always recoup the costs if you are successful with your lawsuit i would imagine.

I would imagine that working under a current investor would be a fantastic learning opportunity, but may reduce my income significantly, which could make purchasing my first investment more difficult. 

And, I'm actually a little surprised you're not getting a lot more backlash here too.You are welcome to stay away from Hard Money (which I realize you said you don't want to talk about any more - I imagine it's because you realize how wrong you are and don't want to get beat up for it).

If so, I imagine that they are the ones who "own" & maintain the alley. 

I'm imagining this would immediately recoup the cost of the basement reno., but the plan would be to hold as a rental for several years.I'm split at this point on the idea of that or going with a full 1 bed apartment + living room to keep costs lower (only one fire egress, no mini-kitchen needs on both sides) and guest comfort higher. 

With a little imagination you can add a second entrance and kitchen(long term rental or kitchenette(short term rental).

I imagine this can be highly variable but like @CJashton mentioned above, he manages 4 properties and it requires very little time. 

And lastly, I can't imagine you are going to be able to build new and have it cash flow. 

If so, there is likely pictures of the unit in the report I would imagine.