Everything he said except for real estate advice.)She also gives more wise advise: Build up reserves or safety net. 

Can he apply for an exception from the guidelines?

With a few exceptions that I do not believe will be applicable here. 

In the current market it's difficult to purchase anything (except absolute garbage) in that price range now.

I did the numbers right on the rental (at least its performing exceptionally well so far).

Have an annual or quarterly meetings in NV to do all of that - no exceptions - or your California Franchise Tax Board will come a-knocking,  As to setting up the entities, please realize that your business needs a very strong foundation and several professionals are uniquely qualified and expert in its parts

Everything in the relationship regarding landlord tenant is the same as a market tenant, except section 8 pays some or all of the rent.

So you can rent it out for a total of three years and still qualify for the 2 out of the last 5 residency and get your gain tax free with the exception of depreciation recapture.  

Your plan sounds ok except I would not want the tenants living there to know I am the owner of the home.

I think that once you decide where you want to invest...focus your next efforts on building an exceptional team.