I think regular buyers will take out high quality assets at slightly higher cap rates maybe 25 to 50 basis points higher but no fire sales.The fire sales will be on the really dog properties that takes a ton of work to turn around.

Probably, and I'd definitely say go for it.. but just be ready, the bills can be 4x more than a regular SFH. 

I know the regulations here in Los Angeles are pretty tough for short term rentals but a regular rental can be a great investment.

Just submit through regular channels.  

Buy a bunch of carpet deodorizer and spread it around regularly. 

In some cases, if you exercise the in-service distribution, you freeze your capacity for new contributions.Because the investment will be debt-financed, you may have exposure to tax on unrelated debt-financed income. 

The money is in the long term relationship and regular steady, growing income.

Just as an exercise, run the numbers on a 4 plex.

Triple the regular amount for each months water bill.

You can also consider a regular sale with a life estate.