I would like to keep expanding, but market conditions are tough for buy and hold LTRs. 

You can get paid for the materials, but usually not your personal labor.....

California has some pretty tough regulations surrounding property left behind by a tenant.

Of course these are also just general rules, construction costs will vary greatly dependent on site conditions and design.Most material costs, insurance costs, permitting, licenisng etc. don't deviate greatly depending on where exactly in the city you build and unfourtnately, most of the in-fill opportunties are in the neighborhoods that can't achieve the required pricing to make the cost of new construction pencil.

Kitchen, Paint, Floor, Cabinets, bathrooms tends to be best bang for buck in terms of cost vs value added.I'd search on Zillow and find comps in 2 mile radius, see what the highest sold properties did on their upgrades and materials and model that

Had clients use them, and they claimed the process was way too tough of pulling funds. 

.- Material participation rules still apply: If you meet the IRS material participation tests, losses from a short-term rental can be treated as nonpassive, allowing them to offset W-2 or business income.

One of the biggest factors at play is the ongoing tariff war, which has driven up the cost of building materials, making new construction more expensive.

I have a short term rental that I self manage and am considered a real estate professional based on material participation rules.  

Licensed with permits ~$3,250.HWT standard gas single family low efficiency without exhaust retrofit $900.Sand and stain hardwood floors, natural stain $3 per sf.Paint interior walls, ceiling trim and doors 3 tone paint scheme 2 coats $3.20 per sf (floor area cost includes paint)Click lock LVT flooring install overlay inclusive of prep and quarter round $4.50 per sf (materials and labor)Asphalt roof installation 3/1 - 800 sf bungalow with 2 layers of shingles - ~$7,900Standard porch cap replacement with 2 new precast concrete steps ~$2,500Used stove or refrigerator delivery and install $350New stove or refrigerator delivery and install $HD model specificUse this as a general guideline.