The main reason that I like the larger units it that a 4-plex ranges from roughly 1-1.5 million in my market. 

That's 1.56%.The reason the debt number is so low is because I need the principal and interest to be low enough to achieve my profit and operating cost goals.

The owner said we can have an extension, if it’s within good reason.

The biggest reason I would advocate for mixed use is for the reasons you mentioned, the leases are longer, but also the general "issues" around tenants on the residential side don't come into play as much or at all. 

For that reason, we prefer fast scalable strategies that are repeatable and allow compounding faster for new builds than a build to rent triplex. does anyone have a similar strategy?

Out of state investing in cities within a reasonable driving distance may be a good option. 

It is for this reason I bought the house but my family does not want to move there.  

What is a reasonable Pet Deposit and Pet Rent for a well trained dog of 50Lbs in San Diego?

I can see an explicit exception in CA Tax Code § 17561 that says you can not use the qualifications in Section 469(c)(7) (Real estate professional) to render that income as non-passive, but I see no callout for 1.469-1T and, as such - as a non-CPA - I do not (yet) see a reason why we cannot follow the same rules for CA that we do for our federal taxes; e.g., if the business is not a "rental" business per tax code, we count that income as non-passive and offset other income (W2, etc) similarly.Does anybody else have some guidance (or opinions) on this matter?

With 40k cash, a wife that loves your current home, and 2 kids, stay put unless you can find a compelling reason to convince your wife to do another live in flip or live in a 2-4 unit house hack.