@Lana Lee We got $85k with a 1.6% margin for the life of the loan. 10 year draw period, 20 year repayment period, no minimum withdrawals or annual fees, no prepayment penalty for paying off the loan or closing it out early. basically we never have to touch it if we don't want to.

My margin here after selling/holding costs is roughly ~200k, of which I expect to spend 60k on renovations excluding the window replacement. 

But there is a LARGE margin of error.

The profit margins on the flips aren't as high as when I had the employees but my liability is way less.

So I will see how some of these deals I see as marginal actually perform.

Welcome, @Julie BaekYes, SoCal can be a tough nut to crack for newbies.A couple years ago I mailed out lots of letters to homeowners across LA County with no luck.Then I tried rural Kern County and got a deal from a distressed homeowner in California City.The margins were not as large as they would've been in LA or OC, but I was able to rent it out for 2 years before fixing it up and selling it for a decent gain.Also, have you considered an owner-occupied small multifamily for your first deal?

I actually used to live in Valley Village (Magnolia and Laurel Canyon).Anyway, SoCal can be a tough nut to crack for newbies.A couple years ago I mailed out lots of letters to homeowners across LA County with no luck.Then I tried rural Kern County and got a deal from a distressed homeowner in California City.The margins were not as large as they would've been in LA or OC, but I was able to rent it out for 2 years before fixing it up and selling it for a decent gain.Also, have you considered an owner-occupied small multifamily for your first deal?

However, if you cannot meet that standard, this depreciation recapture will be treated as taxable income for in the year of the recapture, meaning it will be taxed at your top marginal rate.

It doesn't necessarily not work, but you do have more pressure on your margins due to more people being involved making it that much more important to buy at a serious discount, and that is going to be your biggest challenge. 

Welcome, @Brian R.SoCal can be a tough nut to crack for newbies.A couple years ago I mailed out lots of letters to homeowners across LA County with no luck.Then I tried rural Kern County and got a deal from a distressed homeowner in California City.The margins were not as large as they would've been in LA or OC, but I was able to rent it out for 2 years before fixing it up and selling it for a decent gain.Also, have you considered an owner-occupied small multifamily for your first deal?