I think some areas may have more homes that are in need of updating, but it's not the same as trying to find a rental that works since home prices and rents don't increase proportionally. 

In 2018 Santee saw an increase into the $520-575k range for 3/2's, giving numbers that better supported doing a master suite addition. 

The downfalls to SFH are that it is harder to scale your business as you grow, there is more work in property management, which increases your costs, and the loans get harder to get as you grow. 

This not only effectively increases your hot water supply, but makes it safer.

They were both ARMs that increased to 11%, and he couldn't afford payments.

I didn't, but you could add a band of mosaic to add some color.

I wonder if the thought is that by replacing those tenants, my maintenance and repair expenses drop, thus increasing the NOI and value.

If her portion of the rent will increase you may be at risk.

You also have four individuals which increases the number of cars on the property, more visitors, higher likelihood of partying, more inter-personal relationship problems, more wear-and-tear, etc. 

We refinanced our house several years ago to decrease the length of our loan to 15 years which increased our monthly payment a little but has allowed us to make faster gains toward the pay off.