I know this doesn't help you much in this situation but I personally avoid working in any area that doesn't have an appetite for what I offer. 

In particular, I wonder if the ongoing increased supply of mid-rise housing will suppress demand for traditional multifamily rentals from duplexes to quadplexes.

I am just ramping up and am limiting my appetite to several deals a year

Jamila R. do some searching around BP under wholesaling lots of great info right here to wet your appetite.

It's really going to come down to their policies and appetite for risk. 

investors are inherently "bad", unfortunately, and hands are tied by continuous new suppressive legislation.I haven't leased back to owner on a short sale purchase for at least five years, and i have no doubt there's more in the way now.

Plus, if you take the time to structure your notes the right way, then you might be able to sell them via the secondary market--provided there's an appetite for the notes you're creating.

Since the market is down and it is already a buyer's market and the HOA further suppresses prices, there are some great deals.

The only issue I can think of is (aside from actually finding the lenders) finding a lender who has an appetite for buy&hold/owner occupied as I have heard most don't like to tie up money long term.

Here is an article that addresses some of the secondary market activity of the liens:Article Source Link Legacy Second Liens, Once Short of Buyers, Now Lack SellersBYBONNIE SINNOCKAUG 15, 2014 10:44am ETThere was a time years ago when second liens were the toughest legacy home loan asset to find a buyer for in the secondary market.But today, there aren't enough of these second liens being offered to match buyers' appetites — at least from the perspective of a limited group of fund managers who are looking to buy whole loan pools at a discount, said to Jonas Roth, managing director with MountainView Capital Group in Denver.One would think those holding seconds would be happy to hear this, with particular nonperforming seconds in danger of becoming uncollectible under certain state laws.But this motivation doesn't seem to be spurring enough sales to feed existing investor demand, although some deals do trade from time-to-time."