This city is rent controlled.

Plus, you can pretty much expect that if Prop 10 does pass, it's going to be a loonnngggg time before we're going to have serious rent control in our area. 

Her lease contract states the landlord is responsible for termite and rodent control.

OOooooh, so there is risk if say I am paying his loan and have control of the house and he for whatever reason loses the loan?

With an HOA you are dependent on them to fix/maintain stuff that is out of your control.

Being the bank gives numerous exit strategies as you control the asset. 

It all seemed very shady and then I began thinking to myself.... what controls are in place to stop these inspectors from deciding an area is "not accessible" and pointing at "flaking paint" to drum up business for their friends and themselves?

Mold is caused by moisture, so address the source and you can get it under control. 

I control the property using zero-down seller financing - owner carries a mortgage for the agreed upon amount2.

I control the property using zero-down seller financing - owner carries a mortgage for the agreed upon amount2.