Have you confirmed with the local government/building department that you will be allowed to complete such a large addition.  

I think the government should not be running a mortgage business.  

That looks like a description of deeds out of a real estate book, not state statue but that is correct. 1. they are family, 2. there are differences in English law and Community Property laws, that can govern, 3. estate planning can address disbursements of assets to balance equities among the heirs, 4. operating agreements can kick in after automatic deed transfers to accomplish further transfers.

Lower income jobs, purchasing properties below replacement cost, some poverty, city government that has a understaffed code enforcement department, local lenders that understand real estate and the market, low quality properties for rent so you can provide a better product...  

I came here to get a heart transplant and thankfully got one.I am a California real estate broker and have been a agent/broker since 1965 ( have it inactive at the moment, but that is to change soon) and would sue if the need arose because I don't like government sticking their nose where it doesn't belong, and I hate anything that erodes the common sense individual rights of american citizens.

Is there an HOA that governs the area then you might not get the super obvious distressed house.

I am currently employed with the federal government. 

That is where the government assumes that over time the property deteriorate and become less valuable.  

In my opinion, that could be a game changer for residential in the downtown and peripheral areas but the fortunes of Sac real estate in general will always be underpinned by government jobs.As for which market has more cash flow vs appreciation potential, it's highly neighborhood specific.

They have to follow federal guidelines but can be looser with other restrictions.