At least the last half decade has proven this to play out.. compared to cash flow were hey we are going to do this and gambling that rents go up and that cap rates stay low and credit will be where it is today and then in 5 to 7 years if everything aligns we exit.the pros on those of course is tax treatment and income as you hold and pretty much every syndicator out there will take a 100k investment. 

Incentives don't matter to slobs, and either does security deposits.. they figure who gives a Ya hoo...So we all know we can't fix a apartment for 1 months rent,, but we gamble on the good ones that will leave a clean and tidy unit when they leave..and loose out on the slobs.. 

That will be a big part of choosing the next steps.Some lenders will do a short-sale without missed payments, but usually with a hardship (illness, job / income loss, etc.).If there's some balance between appreciation and the current short fall in the LTV, you might consider subject-to or just make up the short fall at closing and avoid the short sale gambling on appreciation to make you whole (not recommended).Dunno ... too many unknowns ...

Should you buy with a negative cash flow in markets like California or Las Vegas and gamble on appreciation (in the early stages of a declining market)?

This is a cycle just like all the other cycles...just like the cycle ignited by the savings and loan crisis...just like the cycle ignited by the banking crisis of the 1920's.I say, take advantage of this cycle and buy up as many properties as you can.

Lots of cash buying in the area.I have also seen some financing buys that must work out to be pure equity/appreciation gambles in that area.In the event that you DO fine a price point that works you will likely have to compete with a favored cash buyer.

The gamble is of course I pay the payment out of pocket during turn overs.

So unless you are willing to gamble with your savings, you do not save much time buying turnkey.

I like to INVEST in real estate, not GAMBLE.....

This also poses risk for short-term mortgages or ARMs.If you're going to hold rentals, my suggestion would be to set a longer-term time horizon unless you feel like gambling...