Many taxpayers subject to the AMT did not receive any benefit for state taxes paid, or only a partial benefit, in the year paid, and so their 1099-G amount would not be included in income, or only partially included in income, in the year the refund was received.It will be a similar story for those in the situation that you describe.Tax preparers, if they're not lazy, should not blindly pick up the 1099-G amount as income but should go back to determine exactly how much benefit the taxpayer received for state taxes paid. 

For most out of state investors Vegas isn't the answer it is similar to the inland empire but more isolated from the job centers in LA and Orange County (ie if you live in Vegas you work in Vegas)  I encourage you to look at both and possibly other markets, but if you are counting on appreciation and are planning to hold for a long time Prop 13 in CA is a nice thing to have.

I was looking into something similar... 

Good tenants don't generally pay a 12-20% premium for a nicer place that's otherwise similar to alternatives. 

Translation:  if they mess up, and they know the law, you may have to do an ejectment (similar to a foreclosure) rather than a straight eviction.Lease with option to buy is the way to go. 

In lay terms it is very similar to a mortgage but most of the closing costs are done at the end in final closing/ deed transfer. 

I have somewhat of a similar situation, but not facing the same dilemma as you are. 

I wanted to be as understandable as possible and decided to invest time into my post but I am yet to receive an answer and hopefully someone will please answer me.2: Yes, similar as what you said but as a total beginner in RE business and for worldwide RE.

2) Why isn't there an option to replace a building at the price I paid for it or similar? 

Can you show a true comp with similar condition and location supporting your price?