From what I've heard, CA is very ADU friendly so check with your city on what's allowed.

Everyone says to find properties and build a buyer's list, but neither matter if you can't calculate the repair costs and also get access to a friend or colleague who has MLS so you can do a proper and real ARV (the other part where all wholesalers fail).

Do you want tenant-friendly or a hammer? 

I also hope airbnb does not continue to get less host friendly.  

My wife briefly help a friend manage their monthly short term rental in San Francisco while they were traveling and have a few friends that do it.Monthly rentals seem to book pretty well, but not at a significant premium to long term term rentals. 

With fully paid-off properties and significant equity, your options are wide open.I had a friend in Connecticut who ended up investing in Phoenix and he was in a situation much like yours - an inherited property and equity to work with.

Maybe seller holds a 2nd, maybe partner with someone, maybe get some F&F (friends and family) money, maybe offer a higher rate for the 2.5 years the 2nd is outstanding. 

Try to get some experience by helping your friend with some of his projects.

I honestly thought to myself that both NY and Cali were very tenant friendly...

I know in Virginia my friend had a similar issue (side-by-side duplex, though, not second floor) and he was not proactive, just warning them several times verbally.