So when I need a new admin for the advertising business I own, I place an ad for a $10/hour entry level position and I get 100 resumes from kids who just graduated with a degree in speech communications, or marketing & PR, or some other BS degree (says the guy with a philosophy degree), and they're $100K in debt and no idea how they'll ever get out of it. 

That said, the 30%-40% number could be what it takes to get a property to be cash-flow positive in San Diego. 

Use as little as possible from that $40K for a down payment  and have the seller hold the note at an interest rate that makes sense and allows you to have a positive cash flow.   

That way you are protected against rate increase.You are in a good position to refi the FHA to a conventional and get rid of the MIP.As long as you are reporting the rental income on your tax return, you will get rental income credit to offset the mortgage.

. - it’s wood Construction and the current owners seem to have had issues with termites, as they’ve fumigated, which includes tenting and removing tenants - expensive procedure that could significantly impact cash flow.The agent I worked with to get this info is excellent and has worked with investors before - pm me if you want her contact.Good luck!

If you are in a single family detached with some privacy in between houses, then I would understand your position more and ask the landlord to please tell the nosy neighbors to feel free to call  the police if they believe there is drug activity or noise complaints because there is not.  

Also, I would be very interested to hear from anyone who has dealt with this kind of market who can share some positive or negative stories.

I recently learned that the safest seconds are those where the first is performing, and there is enough equity to cover both the first and second position.

It's a bit of a gray area for some attorneys, and they think it improper to possibly put an owner in that situation.There are some real positives for doing a Sub2, even with a due on sale clause, but both the buyer and seller should be well informed of the potential gains and losses with the method.

The reality is LLC's have positives for sure but they do have some negatives.