Now the question is

for investment property, should we buy in the worst area, which has the most drop therefore can make positive cash flow or in a relatively good area which can just break even or loss $1000 the first year.

I think it all comes down to what kind of tenant you are willing to or can handle. For example, Richmond's Iron triangle now is so affordable (dropped 70% to $100/sq), if rent, definitely positive cash flow. But do you want to bring a gun to collect rent? Or evict your tenant every other months?

My friend bought a few there. We'll see how her experience is a year from now.:-)