Talking with the right attorney is important in this business not only on this point but many others as well.They key to understanding is to first clear your mind of any preconceived notions you have on the subject and concentrate on the words 'personal, family or household use'.What if borrower received more than 100% of purchase price on a purchase money loan ... money for Hawaii.  

I see it as a wave that's running in concentric circles and spiraling outward.

In other words, we're concentrating on one or two at a time.

I figure I'll mostly concentrate on renting lots just to get some cash flowing in ASAP and then focus on renting and selling mobile homes.

Also, fire might not be likely certainly not for more than one house but if the houses are concentrated in one area they could easily all be hit by a hurricane or major rains that ruin a few basements etc.

I've used this approach in most cities I've lived in and have had interest in investing in (cash flow) and found that you can usually map concentric delineation of affordability.

So, if I ignored the "living in" number and concentrate on the rented out numbers, this should be considered a decent deal?

You can spray all of the mold with concentrated hydrogen peroxide (mix sodium percarbonate with water)4.

. - why concentrate on REO's?

You still concentrating on the San Jose market or are you starting to venture out to areas like the East Bay?