Some jurisdictions prohibit landlords from holding more than the equivalent of month's rent for security deposit.

Are you suggesting that San Bernardino county is going to make prohibitive legislation on vacation rentals?

This situation is also prohibiting me from obtaining equity loans as well.

Also on splitting the 2nd and 3rd units the current owner may have found at the rent they are charging and the cost of redoing electricals to be cost prohibitive.

@Dan Leaman It is possible to combine owner financing with a 1031 exchange but there are some difficulties in execution that can prohibit you from making it work.All the proceeds you want to keep tax deferred must remain in the exchange untouched by you and be used in the next purchase.  

@Stephen Bagnani The issue as I see it is that the only places where these "Tiny Home Communities" are attractive are areas that have prohibitively high costs of living due to restrictions on new construction/development....which essentially means where ever they actually might make financial sense to build them, it isn't going to be allowed. 

Does it prohibit you from contacting the tenants?

The IRA owner is prohibited from making any repairs or doing any maintenance work on the property - that is considered sweat equity, an illegal contribution to your IRA.  

That has been invaluable to me as classes for the individual can be prohibitively expensive.

I find full replacement cost generally is prohibitively expensive, for instance we bought a property in 2012 that is a rehabbed school that is all brick and will outlive me and my children.