My concern is how they are producing bread on the table, today, not some future retirement strategy. 

Both of my rental houses are doing well producing good cash flow, but back in my back of my head, I'm telling myself another rent house will be a smart decision, but that's hasn’t not happening till 6 more months and I know vehicles are bad investments but when do we start enjoying ourselves

Don't pay off your home, buy income producing properties and never look back. 

It will probably produce greater wealth than a similar investment in the high cash flow Midwest.Think about what you know of San Diego RE. 

Eric.If they are 5 legal units then it is a commercial property and can be appraised based on the income it produces. 

With income producing properties your debt can be offset by rental income (you will need to provide the rental roll).Max number of loans is 10 (hopefully 25 in the near future).

@Julie NearingHi Julie  for the most part it all comes down to which method (operating as a triplex or as a fourplex) is producing more rents/income.

The in-laws make around $70k combined and have around $50,000-$100,000 in savings.As an alternative strategy, what if the home equity loan is used to finance a new house for the in-laws, as well as a handful of multifamilies in a place like Bakersfield, that produce more cash-flow than we would get from a triplex in LA?

These costs tend to reduce your annual cash flow, so I would venture to say that your first years of ownership will most likely produce your best cashflows.  

Renting will yield a smaller cash flow but flipping might produce a larger profit, quicker.