Great information yal Im born and raised in San Diego living in almost every area.

I would do my best to keep those tenants long term raise the rent every so often and be sure that the maintenance was done so I could count on this house being a considerable portion of my retirement.

But I think you still better off with areas that appreciate quicker as you can raise your rents to recoup some of the money that you need to pay for higher taxes.

The HOA was painful at times - one month after taking ownership they raised the dues a hefty amount.  

Raise capital :)

Jus to clarify, we bought a triplex and renovated it, raised the rents and raised the value.

http://www.latimes.com/politics/la-pol-sac-california-high-housing-prices-20160414-story.htmlThe California Association of Realtors has predicted a mass exodus out of the Bay Area this year, either to more affordable surrounding counties (Sacramento and the Central Valley) or out of California all together:http://la.curbed.com/2016/3/4/11161626/california-housing-costs-migrationBoomers who are sitting on a ton of equity realize they can move out of the Bay Area to retire to live like a king somewhere in the Midwest and purchase their house cash, and Millennials are entering their prime "settle down" years and think $650k for a 1950's tract home is a joke and they can't afford it even if they wanted it.But, they can move to Sacramento and buy a $350k remodeled home in a nice area with great school districts and raise their newborn children.

Now depending on the price of the lease hold you might be able to throw upgrades into the house and raise your rents but still cover your expenses and gain a good ROI so when those repairs pay themselves off you are now gaining more cashflow than before and when you go to sell the property you only need to do minor fixes if anything.There are also other benefits to buying leaseholds again depending on the contract.

Have you raised capital for the deal or are you funding it yourself?  

Maybe raise the rent every 3 months as a reminder of why leases are a good thing?