The house has 5 units; however, it is only zoned by the town as a 4-family.

Rest sorry to hear it didn't work out.Honestly, controlling your own deals means you have to spend part of the year active in those deals or even in the town where those properties are.

Already, it's pushed out-of-town investors to focus on student housing where GC has less of an impact.

For my town tenants look at affordability and prefer the residential area over apartment structures. 

People who live in an area their whole lives (most people), have a certain set idea in their head about the character of different towns and different neighborhoods.

I'm a Realtor with a couple properties listed in Boise, ID and a neighboring town for my investor/client that are currently rented as co-living or rent-by-the-room and getting killer income. (7.3% - 9.5% Cap rate) So far, every inquiry has been baffled by the concept of co-living or rent-by-the-room and immediately ask if they're being run as a halfway-house (which they are not).

We spent weeks in different towns to be with her while she was having, and recovering from surgery.

I invest in college towns and resort towns mostly with a summer lake warm lakes and ski hill within 30 min with little to no vacancy. 

In most areas in San Diego, that is condos, town houses, etcWith that budget, I would be leery of recommending San Diego.

Best bet is to carefully analyze the zoning maps and regulations or just call the town and ask.