If you and the seller can't have a meeting of minds in the middle, great you move onto the next one.FHA on MFR, especially with our older housing stock in the Bay Area, it's a giant unknown if you can even get the property until the appraisal is back.More generally your best bet for using FHA to buy a MFR in the Bay Area will be to go find something off market where you aren't in competition with multiple other buyers putting 30% down, etc.

In our recent purchase we knew the multifamily industry was hot and competition was high.

Since the bank established their acceptable number in the short sale process, they're unlikely to let it go for less money at the auction; there will be competition at the auction; the potential short sale buyer has likely long ago moved on to buy another property, etc.  

If you are using Zillow to see whats on the market (your potential competition) and what has sold and using that to come up with your own estimate of value, then that is ok. 

Just a thing to keep in mind is that there is a lot of competition, and a scarcity of multis in the Baltimore/DC area...so the descent property get snatched up quickly...and even the bad ones have low cap rates.

You will be competing with a lot of investors who are here in person and to say it's competitive is understating it.  

The 10X Rule teaches you how to: Reach goals that you previously thought were impossibleCorrectly set goals and guarantee their achievementCreate unprecedented levels of happiness and satisfaction in every area of your lifeUse fear as fuel to move you into actionGet everything you want and never have to settleDominate your competition and become a role model for success"

Big market = lots of competition and people already doing much of what you can find on here.

Flying drones and filming adds a special element to the listing and sets me apart from the competition.

If you put in like-kind materials, you may be able to squeeze into that budget (if you're doing the work yourself), but you need to see what competition has to offer.