That city has the potential to grow due a rich city next to it is growing aggressively fast, but at this current moment the city is not in a great financial situation.The property is a 6 units apt building in decent shape.

You will need to know and understand though financials of renting and determine if the property is a worth while investment as a income property or a money pit.

.$2,135.00MONTHLY INCOME$1,694.08MONTHLY EXPENSES$440.92MONTHLY CASHFLOW14.08%PRO FORMA CAP$9,853.40NOI$22,125.00TOTAL CASH NEEDED23.91%CASH ON CASH ROI13.59%PURCHASE CAP RATEExpensesIncome50% RuleTotal operating expenses:Mortgage expenses:Vacancy:$170.80Repairs:$213.50CapEx:$106.75Electricity:$50.00Water & Sewer:$162.00Insurance:$120.00Management:$213.50P&I:$380.20Property Taxes:$277.33$72,500PURCHASE PRICEPurchase Closing Costs$2,000.00Estimated Repairs$2,000.00Total Project Cost$76,500.00After Repair Value$70,000.00 Down Payment$18,125.00Loan Amount$54,375.00Loan Points$0.00Amortized Over30 yearsLoan Interest Rate7.500%Monthly P&I$380.20Total Cash Needed$22,125.00 Financial Info2.79%2% RULE $15,625.00TOTAL INITIAL EQUITY2.83GROSS RENT MULTIPLIER 2.16DEBT COVERAGE RATIOAnalysis Over Time3% /yearEXPENSE INCREASE 3% /yearINCOME INCREASE 2% /yearPROPERTY VALUE INCREASEYear 1Year 2Year 5Year 10Year 15Year 20Year 30Total Annual Income$25,620.00$26,388.60$28,835.54$33,428.29$38,752.55$44,924.83$60,375.21Total Annual ExpensesOperating ExpensesMortgage Payment$20,328.97$15,766.60$4,562.37$20,801.97$16,239.60$4,562.37$22,307.82$17,745.45$4,562.37$25,134.21$20,571.84$4,562.37$28,410.77$23,848.40$4,562.37$32,209.20$27,646.83$4,562.37$41,717.40$37,155.03$4,562.37Total Annual Cashflow$5,291.03$5,586.63$6,527.71$8,294.08$10,341.78$12,715.62$18,657.81Cash on Cash ROI23.91%25.25%29.50%37.49%46.74%57.47%84.33%Property Value$71,400.00$72,828.00$77,285.66$85,329.61$94,210.78$104,016.32$126,795.31Equity$17,526.25$19,494.41$25,837.43$38,134.84$53,197.53$71,986.64$126,795.31Loan Balance$53,873.75$53,333.59$51,448.23$47,194.77$41,013.25$32,029.67$0.00Total Profit if Sold *-$1,449.73$6,062.22$30,895.02$80,784.39$143,073.13$220,258.21$432,774.81Annualized Total Return-6.55%12.87%19.10%16.62%14.34%12.71%10.60%

But, the property being in CA, and every County being in desperate financial straits, they are charging me $8400 in impact fees, plus $3000 for plan check (the only thing being changed is adding a wall to get the living space down to 1200 sq. ft.) 

Grants or any kind of financial help.

I'm pretty conservative financially, though I don't disagree with the notion of leverage for growth and higher returns.

IF the 75% falls short of the mortgage payment, then the lender will look at your financials to "help" the property pay for itself.So, what does that mean to you? 

However, if my understanding is correct, we could actually sell, without the time constraint and rules of a 1031 and still not have to pay taxes on the event, because of the fact we occupied the property as our primary residence two out of the past five years.

After you're done with that you can always buy a single family to start a family in if you need to.I think it's the best strategy to get started and make a big change in your financial position!

Having the right zoning is one thing But making sure that there are no OTHER Constraints / restriction is another.