Monthly debt payments now eat up half his take-home pay.

Its about 850sq ft, and besides two small (probably about 5'x5') rooms when you first walk in on both sides (where the front windows are) it is one big open space.We were planning to wall off the back, and put the bathroom on one side, single bedroom on the other, and then leave the rest as an open space for the kitchen/eating/living space.

Make sure you budget for longer hold times with your closing costs, especially if using hard money as this can really eat into your profits.

I'll long-term rent it out and eat the negative cash flow, and do cost segregation and bonus depreciation.

What are some market trends of which I should be conscious of?

Lodging in San Diego is expensive, but sharing lodging and eating in can off set some of these costs.  

At the numbers that I have seen you would not be able to cashflow at anything below 10%.With such a low down payment you would need to buy insurance that would eat your margin up.Anything below 20% gets tricky. 

I've heard that termites don't eat charred wood (potential bonus)?

Mailing something one time is like eating a salad, doing a set of curls, and wondering why you don't have large biceps.

You can't have your cake and eat it too.If anyone can complain it's the 0.001%: the highest property tax I have seen so far on a private residence is $135,000 per year for an estate on Lake Drive - ouch!!