A few questions:Do you have the parents co-sign?

That notice should be that the leases will not be renewed, due to circumstances beyond your control.

@Leon Doucette  the model of 51/49 sounds great, however might be a tough sell if they are financing 100% of the please let me know how that goes. thats giving you full control of their cash and seems like an unreasonable ask.

You may be required to obtain commercial/portfolio lending when investing through an entity.You may also want to take the advice of how your parents held those 11 units to see how they owned the properties.

There is an "ABC test", as follows:Under the ABC test, a worker is considered an employee and not an independent contractor, unless the hiring entity satisfies all three of the following conditions:a - The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;b - The worker performs work that is outside the usual course of the hiring entity’s business; andc - The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.But under B, my business is renting residences, which includes sometimes fixing a broken doorknob. 

In my eyes it is not an increase since I am adding an extra 160sq ft of living space to the 2bd/1ba but this CA rent control does not really cover this situation.Anyone been in a similar situation recently?

The big issue there is rent control. 

Check out this company if you are looking to get your water bill under control: https://www.econservellc.com/.

Too hard to control you if you only have a few.

I think this continued intrusion will result in fewer mom-and-pop investors which means large corporations (or government) controlling housing more and more, which is a negative for all parties involved.