If I was single and living alone, I would definitely consider it but with a live-in gf who recently had back surgery, it' not ideal at the moment.

Not ideal, but it's doable.

I can only tell you that the local housing authority i deal with needs larger units.

Even the "good" contractors that I deal with are really what I would consider satisfactory and not great.

In the ideal case, there be a "new California" emerging somewhere in the next 10 years.

What's your ideal budget and cap rate?

There are pockets where you can find decent homes for cash flow, but you are much better off looking at appreciation(Not ideal, but its the smile states). 

We would at a minimum want to keep the Security Deposit and ideally charge the tenant for the overage.

@Michelle McGinty we are prepared to withdraw from our retirement accounts if needed, but ideally our real estate passive income and other streams of non W2 income we are working to build will be enough to bridge us to the age where we can withdraw from retirement without penalty.

Eventually, this would be an ideal spot to build a nice home for retirement.I am planning to paint the paneled walls and cabinets, replace hardware on doors/drawers, update flooring.