Couple things here:Financing - bear in mind, if you finance them and default occurs, you will then need to foreclose (lengthy process, 6-9 mos++ in some areas, if not much longer). 

In NJ you're supposed to put the security deposit into an interest-bearing account in their name.

But we're being a bit aggressive with it, tearing down the garage and putting in a 1,060 sq ft 2/1 above it along with a guest bedroom and full bath behind the new garage.We're through the initial design phase with the architect and now doing our soils report so we can get a structural engineer involved.

Same goes for number of LLCs and what to fund them with, since bear in mind that CA tends to be more cumbersome and expensive to have LLCs than other states.California is generally more cumbersome than other states when it comes to taxes and filings.

The VA loan regulation is definitely a bear of a document, but it's got some pretty interesting info in it.

However, unless you can get it at an incredible price, I'd expect the insurance costs on a property in the 1% Floodplain would kill your numbers.If you are in the 1% floodplain, the math bears out that over a 30-year mortgage, you have an approximately 26% chance that the property will be flooded AT LEAST once.

Have you considered Big Bear?

And you bear the risk that they might destroy your renovations.There is no specific length of time required by tax law.

Bearing in mind I am not a local and I don't work in the US.

Based on the restrictions, Big Bear seem more manageable.