I am dumbfounded by the high prices investors are paying for property.

[Account Closed]

This happens to me time and time again. I just got off the phone with a seller of a house in Florissant MO who told me that 5 other people made offers on his house and that my offer was less than half of what the next highest offer was.

I offered $20k on a house with an ARV of $100k. It needed $41k in rehab (and I know I can get my rehabs done for much less than most too.)

This means that someone else offered more than $41k. But why, how on Earth can they do that? Maybe my comps were off, but they can't be that far off.

Here is what the numbers look like with a $41k offer. And they accepted an offer higher than that.

$100,000 sales price

-41,000 purchase price

-41,000 rehab cost

-12,000 other cost

-----------------------------

= $6,000 profit

This is not a good deal. I have seen this happen hundreds of times in the last several months. Am I missing something? Why are so many people paying so much for properties now?

[Dev Horn]

One challenge is to keep track of your comps. I've scratched my head at how a guy could beat me only to find out later he sold the rehabbed house for a price higher than my ARV, which was based on past sales comparables. Here in Dallas it's a tight market as well and prices are increasing, so you have to put a premium on your ARV... maybe a factor of 1.2x what the comps are telling us.

The old ARV x 70% - Repairs model is a non-starter in most markets right now. Serious investors - not just newbies - are paying more to get deals and maybe not making the % they'd like, but as long as the ROI on their capital is acceptable, they'll do the deal... better to make a little money than NO money. The kids gotta eat!