If I was to invest in a volatile market such as the stock market I would invest my money in low cost index funds this way I own a piece of the whole market.

There is volatility in the business and having only one house exposes you to that volatility.  

I agree that buying stocks on margin is a very bad idea ... their prices are far more volatile and you get margin calls to potentially deal with.

This is because it is true that in the short run the market can be volatile ... however, the only ones who lose out are the ones who panic and sell, are forced to sell, or get foreclosed on, but every other owner has won big time over the long haul in CA ... if/when you decide to buy, make sure you will not become one of those people (thus the added requirements).One other thing to think about that I've had success with ... rather than selling in 5-7 years to trade up, consider saving and/or cash out refinancing the down payment on your next place to buy without selling.

This NYT article " A Quiet Giant of Investing Weighs in on Trump" pretty much sums up how I feel:“The big picture for investors is this: Trump is high volatility, and investors generally abhor volatility and shun uncertainty,” he wrote.

Often residents of "not so good" are more helpful and considerate than people living in the top neighborhoods who want the world to know how special and entitled they are.Try to pay attention to who your neighbors will be and what type of traffic goes through the neighborhood.From a strictly investment standpoint, in Silicon Valley, lower rated neighborhoods and lower rated homes tend to have more volatile prices.

But during economic downturns, Class B & C experience very little volatility in market values and market rents.

3) What kind of cap rates do investors typically hope for to offset the additional risks/volatility?

One warning, though, they won't likely appreciate as much or fast as Glendale (which is how they got to be less expensive in the first place), prices will be more volatile (they'll get hit harder in a downturn) and cashflow while initially larger will also be more volatile (lower quality tenant base), so there is never any free lunch.

Fair enough but it is volatile because we're moving to an Internet Age society now.