Do you want a company that will keep the long-range investment objectives in mind or one that focuses on today and today's profit alone?     

Perhaps we "buy" the house from them for the $328K balance to satisfy the lender and don't need a large down payment and then have a separate contract with them to pay $x per month until we've paid the full $172K amount.

Also, keep in mind occupancy is usually calculated yearly.

Given that I would pay 3/4 of the property's assessed value I think this could be a great opportunity.

Learn to control your spending and pay off debt.

I don't know your living situation but if your paying x,xxx for rent or a mortgage and instead by living in one side and renting out the other you will be paying y,yyy instead and y is less then x that's great, especially if you can rent out your primary residence and make income there too. 

My net number is rental income minus expenses(3 mortgages, paying power bill at all three houses, property tax, insurance, internet in two properties).

If you don’t owe then, everything is profit without paying overhead depending on the structure of your lease.

Am I ok with this plan to ride up the appreciation, mortgage pay down and rising rents?

We pay $850 for a WH install, so, that seems high but you are in CA.