Only the portion of the principle that is in excess of your basis will be taxed at the capital gain rate (as long as you held the asset for more than 12 months).  

When a gross excess of speculators come to the market bidding up contracts, it inflates the price of the commodity pure and simple.

Frankly, 50% just seems excessive.

What is your appetite for rehab?

You should only consider switching when your current software has a significant flaw or lacks features that force you to spend excessive time on workarounds.

If using accurate underwriting (something close to 50% expense estimate) your costs will be far in excess of your $3k current lodging expense.  

California charges a minimum tax of $800 a year per LLC, and more if you have gross receipts in excess of $250k.

If you have patience and drink excessively, maybe a 203K loan would work, otherwise, I'd look for a turn key home. 

How do we protect ourselves from a tenant causing us significant damage in excess of the deposit amount? 

Any person or entity who in any way acts on behalf of, or in place of, any party of interest with respect to filing a claim for excess proceeds shall submit proof with the claim that the amount of excess proceeds has been disclosed to the party of interest and that the party of interest has been advised of their right to claim excess proceeds on their own behalf.