If it's the latter, the online auction sites start the bids low as a teaser in order to get competition and more bids.  

Overall, assuming there is enough demand to meet these numbers and we can buy at these still very depressed prices, it seems like it would be a low floor and low maintenance investment, generate moderate returns for the next 5-10 years, and have very high potential ceiling in the event the area experiences a comeback which many special interests are already working towards.

I've also heard BP podcasts where people bought extremely low priced properties with all cash (under $50,000).

My goal would be to purchase a triplex/quadplex in the next 2 years using FHA and house hacking, but with such a low down payment, I can't find ANYTHING in the majority of LA county that could even remotely be positive cash flow.

@Elliot Saks - Milwaukee has great cashflowing properties as  there are a disproportional amount of renters (roughly 40% of households) and a solid inventory of low-priced housing. 

Do cardio and weights (not just cardio)4.

While speaking with a lender, she brought up that I should invest in my homestead before buying my first rental property so I can take advantage of interest rates while they are low.

Without a job your chances of success is likely very low.

It could be it's one of a small percentage of co-ops that does allow investors and there are too many units rented, or the sponsor still owns too many units, or it could be the reserves are too low, or not enough insurance, or a lawsuit, etc.

There are "deals" to be found in that area, but the schools are poor, and your rental rates will be low.