Buying a great value so that renting it out will earn you a good return on your investment is a sound and realistic objective. Home prices are still low and there are still some excellent values out there and the rental market in Milford is hot. It is a good idea to differentiate between a foreclosure, an REO and a short sale, however.
A foreclosure is a property that is sold at auction. Normally there is little or no access to the property before the sale, the title is not necessarily "clean" and it may have several liens attached to it that will be the responsibility of the new owner. These homes are sold at auction and require enough funds available immediately to cover the entire cost of the property. You must do your due diligence before taking on such a risk but if you have the cash and have done your research, these can be amazing deals.
A bank owned property or (REO) is owned by the bank but is sold through the multiple listing service using Realtors. These are sold like any other property in that the purchaser recieves a "clean" title with the liens taken off before close. The banks tend to look for offers with the least number of contingencies - a cash offer with no financing contingency tends to beat an offer that requires financing for instance. The bank also demands paperwork that is biased on the side of the bank. They appear very stubborn in demanding this, but when there are no other offers and the buyer is stubborn, they have been known to bend on their policies.
A short sale is when a seller owes more money than they can take away from the sale of their home. These sales require prior approval from the seller's lender and can take many months to close. Since a home must be in the foreclosure process for the bank to consider selling it short, often it is a race to close on a short sale before the foreclosure goes through or almost as frustrating, before the bank sells the note to another institution and the short sale process has to begin again from scratch!
Sometimes buying from a homeowner can be a better value than one of these distressed sales because with distressed sales, often a property has been neglected for years and there is a lot of maintanence and repairs needed. Working with a professional Realtor is the best way to find great values, both in distressed and non-distressed sales.
Good luck to you in reaching your goals!