Where to invest or how far away depends on you, you can head upstate were prices are more reasonable or you can head South or to Midwest prices are manageable compare to our local market and laws might be more in Landlord favor..

Luckily, I had a good job through the recession and rented out a room to a friend, but I've often thought, if I had lost my job for some reason, I may have ended up losing the house because I had no equity and no real savings. 

I do have quite a bit of equity in my house though and I'm trying to decide if it would be wise to tap into it or not.

I see how much equity and what your interest rate is, but what did you pay for it vs what it will sell for?

It could be a syndicate has ran it's course, a bad partnership, a divorce and a split of assets, investor is bringing investments closer to home, needs money for another project, etc.Sounds like you are competing with home buyers who will pay a premium and are fine with just a little built in equity.

You should also get another agent, as this agent doesn’t seem to be working in your favor.

We will be paying the entire cost of the place over the next 17 months from developper.The most likely plan is to take out a 10-year HELOAN at about 4.5% fixed on my primary house in CA which has a large equity to pay for the property over the next 17 months and then amortize that over a longer period of 10 years.

Profits can be split based on the percentage of equity contributed plus your time/effort in self managing and being the boots on the ground.

Your sister could be added on as a non-equity employee and issued a W-2 salary for services provided. 

You might also consider lenders that will back you up that may be out of your area but offer more favorable terms.