Given the low cost of the repair, I'd just eat it and move on.

Those two can directly eat at your profitability.Other downsides and risks are a prolonged rehab and of course the very hustle of the rehab.

While a 3-4 unit property would be ideal, I feel like the potential for turn over would eat into cash flow.

This world is full of Animals.

As I'm about to start medical school next fall, I've got a goal of developing passive income approximately equal to this salary so that I can eat and pay my mortgage on the condo (I plan to house hack again and live with another med student) preferably out of that rather than having to take out more loans that only have one repayment solution. 

So if all your debt is in your rentals, you may be considered less risky as those are income properties, not where you sleep and eat.

I wonder if my staying in California and buying relatively cheap property in say TN or NC/SC for rentals is unmanageable and then hiring a property manager eats into the profit.Thanks for any advice in advance!

As it is "they" are now realizing that tenants are not going to be able to repay the rent -  so soon they will want us to just eat it...... 

Prorate the rent for the # of days the tenants are without a water heater and eat the cost of the plant.

Best of luck, the 100+ units are a different animals.