What do they look for with conventional owner-occupied mortgages? 

Taxes in some areas increase if not owner-occupied; contact your municipality. 

You could do a 3-5% DP owner occupied loan for the primary, and get away with say 30-40k invested in that, and have a low 3% interest rate.

Hi Follow investor/landlord,I have a duplex for rent, one unit has been occupied, other unit is vacant and has listed on market for 3 months but still haven't rent out.

It holds the property until a lease is signed and states failure to sign a lease or occupy the property results in deposit forfeiture. 

@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.

Since they are currently all occupied, we have not made wholesale changes, but those are planned.

The property will likely not be more valuable that it is now.Intended purpose of the investment is for cashflow and long term hold.The basics of the listed property are:Listed at peak value ($110,000)3 Units: 2 bed 1 bath occupied and renting at $8001 bed 1 bath occupied and renting at $6501 bed 1 bath occupied and renting at $650Total rent income: $2100Conventional financing at 20% down. 15yr/30 baloon.Owner expenses (insurance/utility/taxes/Etc.): $7600k/annuallyAfter putting away for vacancy/cap exp/management exp/repair/maint.

Below are some CA markets that allow for non-owner occupied STRs:- Monterey- Palm Springs- Fullerton (near Disney Land)- Sonoma County- Huntington Beach- Santa Barbara- Joshua Tree- Malibu- Big Bear Lake- Newport BeachGranted, you'll have to do research on Rabbu and Airdna to find the best spots for cash flow, but they certainly exist.

Ask if there are any updates to the bylaws in the works, find out how active the HOA is, what the ratio of renters to owner occupied units is, etc.