I don't think it is worth it to love away from your family for a year just to get a deal with a low down payment.

As Ben mentioned, if you can reduce your living expenses while paying down mortgage and getting appreciation, then you are probably greatly impacting your net-worth.  

We want to avoid charging them for the stay plus the deposit, then refunding the deposit after they check out.

Prior to jumping ship you should look into what you paid for your California properties, what they are worth today and calculate your monthly income from appreciation.

Your household names: Ernst and Young, Deloitte, KPMG, etc all offer audit services, as do your regionals like Grant Thornton.A full audit will typically consist of spot checking everything from invoices/receipts tying out to specific checks paid by accounts payable, and down to leases being input into the system, and tying rent payments to cleared checks.  

It's still worth noting as well that just because you're friends with someone doesn't mean you should skip out on any contracts or paperwork either to keep everyone happy and protected 

I called that afternoon to check on my policy before going into the weekend especially seeing I had renters checking in.

Again, the issues here would be if those properties were structured incorrectly or filed incorrectly....but I think it would certainly be worth having a conversation with a different lender about it.

Just wanted to check opinions if it's going to be too small or should I just do decent size 1 bedroom with living space.

:If you are looking at information about what the draw is to this specific area, I'd check out this quick wikipedia article that talks about trends:Let's look at a year over year analysis on this area from 2018 to 2019.