In my mind I'd totally be open with a duplex neighbor that I'm the owner, just trying to get a leg up on retirement, yada yada yada.

Also like AL Lowry says: If everyone is selling apples, sell oranges, or go to another area and sell apples.Actually sorry to hear this happened to you, you'll be better for this!

You're comparing apples and oranges (i.e. your own calculated cap rate vs the seller's 7.75 cap rate).  

I live in LA so he will be doing much of the face to face leg work for purchasing, upkeep, and eventual tenant management. 2.

You’re also likely to have to do a fair amount of leg work before getting the desired result.Government is not the most expeditious when processing paperwork, so you’ll have to be patient.

Okay, I'll buy all that, I was told I'm busier than a one legged field goal kicker in triple over time.

There is scheduled development of luxury apartments right next to the train station and more half way through in South Orange, just next door, has several apartment plans on the way (:-/).

I have an idea I'm working on with offering devices to local landlords, but so far it's still in the planning phase and hasn't grown two legs of its own.

You can also find duplex buildings under 375K in LA and Orange county's Don't give up the deal you need to start your investment portfolio is out there.  

The problem seems to be that all the "big shots" of the area are outsourcing people to do there leg work and getting the best deals before anyone else can.