How do you like to advertise your business?

Here is some info: SF STR FAQAssuming the info is up-to-date, it must be your permanent residence (you must live at the property for a minimum 275 days a year), you can rent unhosted a max of 90 nights a year, you need a business license, and you need to pay the city $925 for a STR certificate.

I don't know how that business could survive long-term with such low rates.If those numbers are accurate and you can net $38,000 a year, then it's worth holding onto.

He had a tech job and we talked the business and he was legit and when meeting the family, they were very respectful. 

This is a very valid business model and costs are low.  

From what Ive read, it looks like I may have to get a business certificate to do this in SF but Im not sure what that entails or what else is involved?

I am looking to network and build a strong business relationship with a local real estate agent.

You will need to find partners, you will need to travel to where you wish to invest, you will need to understand the ins and outs of the business by being actively involved and treating it like a business and not some super passive investment.If you don't want to do that work I suggest you just put that 200k into some sort of diversified mutual fund that can make you 10+% on your money without any of the work of real estate.At the end of the day this is just my advice and I'm only a stranger on the internet.

But I do not buy bottom barrel properties in bad locations (busy roads, crime, eye-sore views) instead I focus on making a property one that the average modern family will want. 

We live in California at the moment and I have W2 job and my wife a small online business.