Tax implications would be a big factor, as would the predetermined buyout(or methodology for calculating future buyout amount), but the big factor would be their desire to max out profits weighted against their desired quality of life.But those deals are almost always a result of being observant at the right place and time.

But if you don't need the money now, San Diego is probably as good a bet as any to outpace the national home price appreciation rates over the long term.The other option is to cash out and put your $500k of equity to work somewhere else, maybe in turn key properties in the Midwest where appreciation is a more modest 2% (every city is different - I used Chicago to come up with 2%), but your return is weighted more to cashflow than appreciation (less risky).

I would tend to put heavier weight on MF rentals than a SFH lot, building a SFH is riskier than apartments mainly and it typically would increase your income. 

You can often find sellers lying to buyers but very rarely to the IRS.So lenders and buyers tend to put more weight on actual transcript returns from the IRS.

In retrospect, I did put a lot of weight on tax rates, not so much because it was an iffy business model, more because it bugged me too much.

They are worth their weight in gold I saw this happen years ago.

Just finished paying off my student loans last month (huge weight off my shoulders), and am looking for more ways to become financially stable while owning my own property.

Everyone on this thread has made very valid educated points.I don't suggest this for a newbie living paycheck to paycheck; but if your in a financial position to bear the weight of some repairs and vacancy out of pocket, this may be a great long term play.Although we don't typically invest upon speculation, an educated person could make an assumption So Ca will continue to increasing in value over a long term period.

Think a list of qualifications that applies a weight to each trait:Credit Score - XPets - XIncome - XPrevious recommendations - XLength of proposed lease - XDeposits - XTransunion gives you a go- no go decision but the above may help you grade the quality of each potential tenant while being objective.   

Hey @Steve DellaPelle - I'm not speaking from personal experience here just my opinion, but I'd say that this depends on how heavily weighted each benefit is to you.