My ideas:Renovate (which apparently will cost well over 100-150K but could improve its value)Tear down (build something new on spec, maybe?

There will always be people moving to the LA area and the pocket you are describing is still improving itself. 

However, I've been thinking about "distressed" properties and the equity you'd build quickly by making improvements to the property.

Anything invested in the property in the past when acquired or improved is a sunk cost and should not be considered in sell vs hold alternatives.For example, an investor who purchased 20 acres of land five years ago for $50,000 per acre paid $1,000,000 cash.

@Dusty LewisMy friend 'wholetails' mobile homes, which means he buys, does no improvements, and then resells to someone else.

Tenants may also request TI's (tenant improvements) which is payed by the owner to remodel the space for the tenant.

Property has been over-improved for the area, in my opinion.

If you are currently looking at buying a house to live in you could look at buying a small multifamily to live in one unit and rent the others or even look at doing a live in flip over the next couple years (save up as you go and make steady improvements while living in the house).

You could qualify for FHA financing as an owner occupant with 3.5% down, but the property will also need to qualify through self sufficiency.Live there a year, hopefully improving it along the way and saving, saving, saving. 

First-time buyers will be forced to wait on the sidelines while they improve their credit score and debt service ratios, or save up a larger downpayment.