If I go buy a house as an investor right now using a rent to own model- there is no way the market rent would cover the nut- investors have had a hell of a time trying to even break even these past couple years.

We have experienced the oversaturation here like most places, and a couple months this winter RevPar off by 20-30%, but picking up now, and expect peak season to be full as typical. 

Just a couple weeks ago I saw one property on and off market in less than 2 hours.

When I see places like that I get tempted to throw up a door to divide the living spaces and make a couple of units out of the one.

It looks like you're on target with the bullet points you provided here.I do this type of deal all the time, feel free to connect with me to discuss more (preferably tag me back in a reply here so I can provide value to everyone with public replies).You can catch up the arrears, make monthly payments, and either LTR, STR, or wrap-sale it to yet another end buyer for a markup!

In addition to Cody Cox mentioned earlier, others are Chris Seveney who has a couple funds, Josh Andrews and Bob Malecki who have the Notable Fund, Dan Deppen and Andy Mirza also have note funds and all of them contribute regularly on this forum. 

City of San Diego has crazy upzoning but instead of isolating it to where the infrastructure can handle it (my preference), they do it city wide.  

There are also folks here who can help guide you through the process (ex. estimating the scope of work, working with contractors, distribution of funds for the project, etc) which is very important when completing your first couple of projects (in my humble opinion).

My agent has gotten all the commissions from my transactions, and over 20 years about a couple dozen more transactions from my tenants (many leave to buy something).

Good Stuff - might be a good time to scoop up properties over the next couple of months - if theres a twin resurgence of lower rates paired with the spring selling season - we could see values jump up again sharply and look back at this period as a rare rare break from a relentless rise in values and "unaffordability"