A popular strategy I've seen work is to scale with properties in the C locations and then slowly upgrade your portfolio into the nicer asset classes as you progress and become more cash flow heavy. 

If something happens and someone is injured due to over occupancy you could open yourself to legal liability and you would have to check with your insurance policy to see if you are covered since you knowingly would be operating for more occupancy than permitted for the structure.

(Unlike the popular belief many hosts have, it is not even 5 star rated properties or crazy place with $10,000 oak front door) That is why I like the STR game.

If someone gets injured on your property it does not matter as long as you are not negligent. 

As others have said, fitting what is popular in your market or what will sell best is always the best strategy.

I think one of the reasons BiggerPockets has lost some of its popularity is due to the concerns you've mentioned.Don't listen to any of the capitalist counter-arguments posed here, you are not wrong in the things you're saying. 

I plan to shop around more but I’m surprised that there aren’t more funding options in California with the recent popularity of ADUs help with the leverage component. 

Data point: we have a long-term rental in a popular STR neighborhood listed through Zillow right now.Every person who writes asking to do some sort of arbitrage is blocked by the Zillow platform.I don't even have to say "no thank you anymore."  

@Kent FordI agree with @Ryan Konen regarding areas like San Antonio’s outskirts, parts of Fort Worth, and growing cities like Tyler and Lubbock, which are becoming popular due to relative affordability and job growth.We will see an interest in smaller metro areas where prices are more accessible and a surge in new construction aimed at entry-level buyers.

I know Baselane is becoming increasingly popular, but I want to make you aware of this ticking time bomb if you're using their banking services for rent collection - if a tenant reneges their part of the contract, they can literally collect everything they paid prior no questions asked.I'm working with Baselane to negotiate this issue, but they remain stern on their end.