My questions are:  What is the best way to go about a tax reduction? 

Take these two notes for example: FCI Example 1FCI Example 2 Example 1 Purchase @ $26,000: 85% UPBUPB = $30,000This is only a $4,000 reduction on what they owe, how could you get this performing again and keep it profitable?

Interestingly, although distressed product from the 2005 to 2007 housing boom and ensuing bust has been dwindling over time, the lack of trading supply stems less from a reduction in the outstanding inventory than some other barriers to sales today.Roth said some banks still have "significant" amounts of nonperforming legacy loans in danger of going out of statute each month, but generally aren't selling them.

I would have to imagine that prices will correct at some point over the next couple years, since that's how real estate cycles work, but I wouldn't let that delay you from getting started, and I don't think it'll be a 50% reduction in real estate values.

All the while you enjoy your increased net worth through someone else paying your principal reduction. 

A lesson I've learned in negotiating for people who are going to live in a property is to ask the seller to do all the repairs instead of asking for a price reduction.

Bryan - I'll be honest - I thought the death of the political forum would lead to a reduction in traffic in the forums, but I think it has had the opposite effect.

I see a lot less price reductions and a lot of new listings are very close to the mortgage amounts7.

Most the property has been rehabbed, its mainly an expense reduction/management play.

After you know all those laws, I would talk with the seller about notifying the tenant that you will only (this can be done through the contract) be purchasing the property if they evict the tenant in the time period of escrow, and the unit needs to be investigated while in escrow, or you want a reduction in price due to the lack of knowledge of that unit.I have inherited a tenant and California is way different and more strict with tenant/landlord laws than most states, but luckily the tenant left without too much muscle (figuratively speaking).