The re-zoning is being considered because a developer would like to build a 60 unit low income (subsidized) apartment complex in the parking lot.

@Ari Dehbone here are the areas in SoCal that allow for Non-Owner Occupied short-term rentals (NOO STRs for short):Palm Springs: 36 total stays/yrFullerton (near Disney Land)Laguna Beach (non-residential zones)Huntington Beach (Sunset Beach area as long as you apply before 3/1/22)Santa Barbara: Inland (NOO in commercial zones and STR-Coastal Zone Historic Overlay Zone), Coastal (NOO unregulated, but court ruling allows for it)Joshua TreeMalibuBig Bear Lake (92315 zip code)Newport Beach (R-1.5, R-2 or RM Zones)You'll have to do your research on specific properties for cap rates and cash flow, but these are the areas I would look in.

You should also check zoning to ensure it's allowed.

I've taken out HELOCs and can't remember any clauses about me remaining in the home as my primary residence, but your mileage may vary.Also, check with your zoning/building department about what constitutes a legal triplex and if one is allowed in the area.

No one wants to live in a construction zone, especially after 2 months of demo. 

Does it have to be zoned commercial plus residential for us to both reside and operate or business?

The major lesson that I learned with this deal is I have to be more aware of the flood zones in the area.

Any other red flags to avoid with purchasing rehabbed properties? 

How is the property zoned?

How did you find a portfolio lender that is able to do non conventional financing such as low down, low interest on owner occupant multifamily zoned properties?