He also indicated several properties he expects to come on the market in the next six to twelve months and why: several of them where bought poorly based upon speculation in the local economy 4-5 years ago and are not being managed well; another bunch are part of a single portfolio where the owner is in his late 70s and has no heirs. 

Values are more than10x what I paid and the uprise is only starting.So, while I wouldn't have bought those houses just to get the good cash return in rents and be a landlord forever, I speculated on the development, while I made good rent returns.

The foreclosure procedure appears to have been made some time ago, under federal law, any borrower must be given notice, regardless as to what may have been agreed, IMO.If you have a NPN first, simply include the balance of the second, if you hold the second, better cross your fingers and pray, but I can't see you holding a housing development note either.Call the development office, they should tell you how they view the lien and your position, it's best to clear the air than to speculate, but I wouldn't have an issue with that mortgage.

Most people who invest in LA speculates on appreciation, as oppose to cash flow.

Again this is all speculation since I am brand new! 

Buying something and crossing your fingers hoping it will appreciate is pure speculation.

There is a bit of speculation involved and if homes are not moving that quickly in that market, you could see some time sitting on the market with hefty holding costs.  

But I wasn't going for speculation.

(CA, Las Vegas are two choices) Keep in mind that this is a speculative investment that will most likely not produce positive cash flow, but in 5-7 years, will produce a large equity position (assuming you bought correctly).

So, yeah, you'll have some money coming in, but its really from your down payment and not from the property.Now, there may be other factors, such as significant potential for appreciation, or new demand from new job growth, that might lead you to want to speculate.