that isn’t subject to higher down payment requirements or higher interest.

Plus the added requirements around getting drawings and general contractor for even adding a tiny closet.

Note that active income isn't the same thing as non-passive income, it's lower bar that just requires that it's a business activity that isn't just entirely passive. 

It also says under the accessory uses section: "nonhabitable structure requiring a building permit." 

Most people call their services "cohosting" to distance themselves from what would normally require a real estate license.

I can make the down payments in the smaller market on cash-flowing deals, but these bigger markets require 40-70k to make a deal the conventional way, and I just don't have that to invest.

Due to item 1, adding an ADU can require years to start achieving any return (once the accumulated cash flow recovers the initial negative position).4) Adding an ADU is a slow process.

This would require a refinance into a loan with a 5-10 year maturity. 

Full disclosure, I'm not a disaster expert, politician or climate alarmist, but according to those fighting fires on the California coast since the 1960's, Devil Winds are natural occurrences each and every decade but require highly conducive conditions to be as destructive. 

However (to go into detail requires a separate post), that's not quite the correct course either.