I would meet with about 4 and select your contractor out of that pool of individuals. 

If that is true it severely limits the pool pf prospective properties to try this on. 

I'd tie it up under contract immediately, and do some proactive due diligence on it.The biggest "hidden" cost in most deals is the ramification of private water and sewer, which this deal does not suffer from.

Sounds to me like wading through some very murky legal waters here. . .

Have you considered HML for the initial acquisitions and then taking a pool of properties to a small regional bank for the long term hold financing?

I'd test the waters a little bit before getting too official.  

However, if you move out, you're actually under water $200/mo, and that doesn't even take into consideration your reserves.So, you just need to make sure the property will cash flow without you in it.  

I made a mistake: only called PG&E, not city for water.

Are you going to be covering the cost of water/sewer/garbage?  

The utilities are placed in the tenants name (except for water) and I believe the government will assist them in paying that too.