Live in it for one year then save up and purchase a second property somehow. 

If my mother lives next door and I say hi to her then the IRS can kiss my behind and I will gladly see them in court.

I lived in this neighborhood for 7 years, purchased a foreclosure in 2014 for 26k, put about 75k into it and sold for 215k (30k over ask) in 2021, so I feel good about the area. 

Meaning that there will always be buyers of financial means that want to live there due to weather, beauty of the city etc etc   The great news is that it is a market you know. 

I live in San Francisco and plan on purchasing it in Los Angeles. 

My question is (because of FHA rules), would it be more beneficial to invest in a condo in San Diego at 3.5% down now, live in it for a year and rent it out and leave?

Either the current tenants' leases didn't expire but rather converted to a periodic tenancy (Month To Month here) and they have been rolling with that for a long time OR they have established Tenancy at Will by continuing to live in the property and pay rent. 

You don't need an attorney to go to small claims court, although it might be worth a quick talk with one to figure out the legalities of the situation where you live. 

Two factors that stood out to us was a beautiful willow tree outback and an open concept living area.

It's a wider door that leads from living room to bedroom.