So it's a non-issue if one is good at what there supposed to be good at, follow. 

Note investing can be divided into performing vs non performing.  

It would just have to be non-owner-occupied and with a 20% done payment. 

That means either you won't cash flow or your Return on Equity (ROE) will be terrible.Since this is your primary residence you'll be exempted from paying capital gains taxes when you sell.If you sell to your parents, it will be considered a non-arms length transaction and will get closer scrutiny.

Is it overkill for a potential non-problem?

If you haven't got keys, evict for non-payment as its the easiest Eviction.

They are threatening to sue to try and get something from you but most likely will not go through with it as you have no written contract in place and in california there is also no non-compete agreements.

Not every state or city mandates that any landlord has to accept Section 8, because the landlord has to not only subject their property to Section 8 inspections, rules and regulations, they also often have to separately arrange for the tenant to pay the non-covered part of the rent and can face difficulty evicting just based on that.

And even within REITs, while most people think publicly traded, you can also get into Private REITs, non-traded REITs, etc.  

When converting common living areas into additional bedrooms, many DSCR lenders might view the property as non-conforming, which could pose challenges.