With the rise in the market and all the competition, I can’t see how you can make money if you have a mortgaged property?

There is still a heavy amount of REO's, although are very competitive can yield some great results for flip or hold.

You also have less competition since most other wholesalers are going after the residential stuff. 

In essence, I'm trying to buy it before other competition comes around.  

Is there in fact less competition for bigger deals? 

I haven't been to the OKC REIA meetings in 3 months because Thursday is my Softball night--it's a church team but competitive. 

Start up money - You can negotiate seller financing, purchase sub2, raise private money funds, hard money is also an option but expensive and without any of your own capital and experience, very difficult to get 100% funding.Finding deals - MLS is one option, though competitive, you must make lots of offers and negotiate the right deal.

It's what they call "icing on the cake".http://www.biggerpockets.com/real-estate-investingYou asked about subject-to, this may be a great niche for you in the competitive SoCal market, I would strongly encourage you to learn more about it.  

I like your plan.I live in Hayward and think that Fremont is a very competitive market with very tough numbers for investors. 

., but there is a lot of competition here in Richmond and you are correct, it has been a struggle.