But at the same time, investing out of state definitely kind of scares me too.Now my options are pretty much between:1) Investing in LA for cash flow, which would be preferable, but I'm not sure if it's possible2) Investing in SoCal but outside of the city (thinking Riverside, San Bernardino, etc.)

Get yourself a team that knows the product and not scared to write a VA offer.  

I am scared that I am not doing the numbers right or that I wont be able to refinance correctly (or how to refinance at all) given that I get a hard money lend .

But at the same time, investing out of state definitely kind of scares me too.Now my options are pretty much between:1) Investing in LA for cash flow, which would be preferable, but I'm not sure if it's possible2) Investing in SoCal but outside of the city (thinking Riverside, San Bernardino, etc.)

I see it the same way you do, something else to scare away buyers, and an opportunity to negotiate.

Yet we're still here and seeing year after year of housing gains.That said, I feel Northern California is tech-centric and tied to the health of that one particular industry.

I just dont have any experience with houses of this nature and I dont want to scare the seller off or shoot myself in the foot.

Sounds like the only heavy con is the drawing schedule for contractors being complicated - potentially scaring them away (?).

They're likely to fold and comply when you threaten their payment/eviction record or HUD eligibility.Class C-/Z tenants have nothing lose, so nothing will scare them. 

This is not to say it's the best option for everyone, but it's what works for me and is what I think will ultimately protect my money the most.Besides a health cash reserves stash I want no extra cash laying around.