You can also get a acquisition line of credit as we have done for one of our customers/partners.

This does require owner occupancy of both units for at least a year for condo application submission, but also assumes a number of other things including that nothing was performed with respect to prior historical tenancies that would disqualify you from a condo conversion.While the aforementioned would be ideal, it would be all for naught if Planning determines that if at any one time the ground floor was rented in the past.

One property is the residence of the owner. 

Hi,Regarding your questions:#1) I highly recommend you consult with a licensed insurance professional in your area, especially one experienced with landlord-specific insurance.

The rental income will more than cover the mortgage and still provide positive cash flow, which is rare in the California market, making this a great opportunity for us.However, underwriting has expressed concerns about us moving from a presumably larger home worth $606,000 to a smaller one worth $376,000.

That would work.But, if you've already invested a year in that as a primary residence then why not stay there one more year and take the gain tax free under sec 121 the primary residence exclusion. 

There is a reason why Blackstone is now one of the largest commercial owners in the metro.

This is a hard one!

Be very careful if you have never done one of there or financed one yet with a unpermitted ADU.

Would love to be able to secure a multifamily and live on one side.