But being a local it seems like the prices are only going higher. 

I’d suggest reaching out to some local agents in the area.

It is hard to really keep up with those kinds of trends unless I budget 10k a year in updating the property which I am not going to do.I participate in our local council/mayor meetings.

Malibu allows it but requires a 15% "hotel tax" on the gross revenue.I would recommend looking out of state or underwrite the property as a long term rental in the event laws change.

This could be different in your state, always check with your local attorney.  

I used the local MLS and I am a REALTOR so I negotiated off my commission to get a better deal.

Get familiar with the local market trends and property values.

It’s the perfect opportunity for an investor hunting for a smart deal.Located in a great area with a charming downtown, awesome local restaurants, and plenty of outdoor fun by the Guadalupe and Comal Rivers.This is one of those homes that doesn’t come around often—a solid investment with tons of potential that won’t take much to make it shine.”The county has it appraised at $188,000 and here are some pics.  

Going to local meetups is always the first step! 

your comment around "approvals will be easy to get" gives me pays if you've not done this type of project before, I understand your logic, and I don't know your local municipality but it always seems to me that no matter how easy we think a project or approval is going to be, something always comes up.