Here’s my recommendation to get it under control: For a quick fix, start by sealing up any gaps using acoustic caulk around outlets, baseboards, or other small openings.

You can tell the tenant that they can ignore the notice as long as they follow through on paying.As the landlord you want to maintain control of the situation - not allow the tenant to do so.

Walk us through a solution that doesn't involve government command and control.

Since you retain control of your money, how does one consistently maintain 30-50% cash on cash return? 

For example, in my state PA there is an inheritance tax and many TAX auction properties originate from people passing away and the heir(s) not taking control over the estate and paying those property taxes.

Even large and small businesses with intangible residual services like TV, internet, security, pest control or the local contractor with remodels in process could fall behind on payments revenue contract. 

Also control the thermostats so the tenants don't jack up the heat in the winter giving you a massive bill.

Was last year abnormal or you think the normMy guess is you will spend a lot more than $200k on an attorney with benefits etc. but if it cuts down in expenses it definitely is something I would consider and even if it costs a little more, having control with having someone in house does reduce unknown costs and risks. 

One thing that hasn't been brought up is if you put a property in an LLC, it MAY be subject to California Rent Control, even if it is a single family home.

Your strategy takes advantage of your employment cash flow and ability to control discretionary spending.