It's an exception to securities laws regulated by the state Bureau of Real Estate originated by a broker.

DC is too hot and terribly over regulated.

I assume by inflation you mean the CPI...Besides being a terribly flawed government stat, it is a worthless proxy for the rental rate of 123 Main St, HappyTown USA.

Its common practice for many to purchase with FHA or VA (if eligible of course) terms, simply because they are more favorable in small or no down payment situations and gradually build enough equity to one day refinance out of the government backed loan into a conventional.

. - high construction cost due to earthquakes and local regulations keep supply and density of housing low.- loans esp. jumbo,commercial, and HML are cheaper in CA due to competition (3% 5yARM w/25y amortization in hot metros matching the low 2-3% cap rates!)

The biggest things are- can they pay, do they understand the rules and regulations and will they comply, the rental history etc.

Its prescribed by state law, usually will go to lien holders in order of lien, state, local government, IRS, judgments, etc., if there is money after that it will go to the former owner or the heirs of the former owner.

Let's start with googling syndication, ppm and regulation D. 

Getting a short sale in contract prior to it hitting the marketplace has become increasingly difficult, government backed foreclosures now require a listing to be active on the market for 5 business days, and require proof of the listing being live on the MLS (Agent Detail Report to be uploaded into the system the day it goes live).  

HUD properties are essentially owned by the government so they let a company liquidate for them.