FHA loans for 3-4 units must pass the "self sufficiency" test which basically gives the lender evidence that the property can sustain itself and is at a lower risk of the investor being able to make their mortgage payments every month. 

Evidence of a dog/cat feed bowl was in the kitchen.

So it is evident that a 4 bedroom and 5 bedroom will do better for monthly income, regardless of the higher home price.However, I have a few concerns that I would love opinions on:-Is it being too idealistic to assume I can rent out a 4 bedroom and 5 bedroom house in this area?

Where I live we find a lot of dry rot in support beams in basements and evidence of homes needing sump pumps.

I can't comment specifically on the law but rent control laws are not that common because the evidence is clear they don't work. 

The more people blindly follow what "everyone" claims on BP (mind you without ANY backup, proof, evidence) the more this kind of stuff will become "written in stone".

Looked through SD county website and spoke to a few zoning reps and they just point to the "Certificate of Compliance without BA" form, but that form basically asks you to include permit plans (not looking to build) and "evidence of legal parcel" (what we're trying to accomplish, so seems a bit cyclic). 

Unless otherwise provided by law, proof of violations shall not require criminal conviction, but shall be by the preponderance of the evidence.7.In case of conflict between the provisions of this addendum and any other provisions of the housing agreement, the provisions of the addendum shall govern.8.This Housing Agreement Addendum is incorporated into the Housing Agreement executed, or renewed this day between the Owner, or Agent, and Resident.MANAGEMENT                        RESIDENT                       ADDRESS            DATE

In the letter were also pictures of the property evidently showing the debris violations. 

Larger is not the goal, but evidently max leverage on high end homes and loans is very feasible if you search hard enough, and qualify.