If I plan to purchase a rental out of state, is it realistic to rehab a property to be rented out? I live in L.A. and prices are through the roof.

@Richard V. Yes it is, but you have absolutely got to have trusted "boots on the ground."  That means someone local.  Investors get burned by contractors all the time.  I have, and that is with local contractors.  So proceed with extreme caution.

I would suggest that you use technology to it's fullest.  Reporting is the key to making sure you don't end up in a situation where you suffer substantial losses.  

It is important to keep the funds flowing and have the project move as quickly as possible with little or no stoppage in work.  This helps ensure the contractor stays with the job for quick completion.  You want them working every day.  

You definitely need boots on the ground to help select the appropriate contractor(s).  It's also vital that your boots on the ground person inspect progress on the project every 3 days or so.  This person should be in a position to verify what is and what isn't being done and provide photo or video documentation.  It's important to do this before the next round of funding or draw payments are issued. In essence, inspect, verify, document, communicate, before funds are issued to contractor(s). 

We do this all the time. You end up developing and refining systems that lower the risks. Remember - you are investing, so none of your risk can be totally eliminated. It is however, important to do everything you can to mitigate your risk. There are hiccups on any project, the difference can be whether or not you have someone on the ground to intervene and stop smaller issues before they become ROI killers.

Make sure you evaluate the property and understand all your costs BEFORE you make a purchase.  If things aren't in line - it's ALWAYS OK to walk away from a property.  I've seen too many people be so excited to get moving that they made very poor decisions.  Often you hear things like "this property won't be available for more than 48 hours", this may be true, but being pushed into buying something before you have all the info raises your risk substantially.