Tax implications would be a big factor, as would the predetermined buyout(or methodology for calculating future buyout amount), but the big factor would be their desire to max out profits weighted against their desired quality of life.But those deals are almost always a result of being observant at the right place and time.

But if you don't need the money now, San Diego is probably as good a bet as any to outpace the national home price appreciation rates over the long term.The other option is to cash out and put your $500k of equity to work somewhere else, maybe in turn key properties in the Midwest where appreciation is a more modest 2% (every city is different - I used Chicago to come up with 2%), but your return is weighted more to cashflow than appreciation (less risky).

Glad to know you have not given up. Keep

Are you allowing for upkeep and maintenance? 

At the same time I will lease the house out to someone else and be responsible for the upkeep of the property.

I would tend to put heavier weight on MF rentals than a SFH lot, building a SFH is riskier than apartments mainly and it typically would increase your income. 

You can often find sellers lying to buyers but very rarely to the IRS.So lenders and buyers tend to put more weight on actual transcript returns from the IRS.

In retrospect, I did put a lot of weight on tax rates, not so much because it was an iffy business model, more because it bugged me too much.

You'll also want to ensure you have a good property manager to look after the upkeep of the property if you are not there to notice anything deteriorating or which may need attention.You also want to look at whether a pass-through entity helps your bottom line and your taxes.

Mortggae, taxes, utilities, repairs, upkeep...far more expensive than renting.