If this is financing for a stabilized property rate carries more importance but rate combined with origination fees, pre-payment penalty and term in which you intend on keeping the loan in place are all considerations which together should help in deciding the best financing option.

I think pools also factor in to summer rentals, if you don't have one that will hurt you. 

Usually the lender will charge an extension fee to keep the same rate.

Most of my really really high returns are in the lower end of that spectrum.Is there a delimiting factor I use, not particularly.

They quoted me a rate, 1.5% origination fees and 999 service fees initially, I provided all the docs and worked with them for 3 weeks.

I’d suggest you call a PM or two and ask them 1) How much rent they would charge. 2) What fees they would charge you. 3) How long they think it would take to find a tenant at that rate.

What are other factors and neighborhood I should consider?

If you elect a PPP shorter than 2-3 years in most cases, the lender is simply going to collect that fee A) upfront as points rather than as a PPP, or B) with yield, meaning a much higher rate.  

It is important to factor in all the benefits of house hacking into your calculations, i.e. amortization, appreciation, income, & potential rent avoidance.

Instead, he seems focused on discouraging me from setting up an LLC due to the fees associated with California.