In this case, someone left a laundry set behind and you didn't provide it - you told them they could use it if they liked while it was there at their own risk and were not included in the rental.

I’m very curious, what is normally considered acceptable risk in the real estate community in terms of monthly combined mortgages vs monthly total income?

This will get you a better idea of the potential fair market value of your home.

If you are going to do the effort and risk of development, you can build units cheaper and obtain a better return.  

Debt reduces certain kinds of risk.

There shouldn't be double taxation because rental real estate normally operates at a tax loss.The potential time that there will be a tax consideration is when you sell the property.However, your resident state(MN) will provide you a credit for taxes you pay to a different state.This will avoid double state taxation.In general, California state taxes are higher than Minnesota state taxes, therefore, you will be paying the higher of the two state tax rates, which is California.

There are ways to mitigate the risk of the distance and yes you do have to hire a property manager. 

Regardless, it's still a risk without permit.  

My markets are very difficult I'm finding, even when looking at potential fixer-uppers, the numbers just don't work.

@Joshua McMillionI just don't see the growth potential for Decatur that others do.