Are buyers over paying and taking a lot of risk of am I wrong?

[Victor Gutierrez]

In the area that I live in the state of Rhode Island the houses are selling way to fast, I've be trying to buy a house for the last six months without any luck, a lot of houses are getting under contract without the buyer see the house. People are offering over the listing price I don't want to do that because a lot of the properties won't cash flow and if they do would be maybe under $50 per door. Is people over leveraging and get under water in a bad economy with tenants loosing jobs?

[Anthony Thompson]

Victor, it's hard to know why someone paid what they did, especially for 1-2 families. 

With those, people might be buying it just as much because they want to live there as for cash flow. In fact they might know it will be cash flow negative but figure any help they can get with their mortgage payment is great.

I would say, when people are paying for 3 and 4 families and the cash flow is negative, then I'd worry that we're starting to reach a top of the market (though how long that can last, who can predict).

On the other hand, rents have risen in the last few years, so be sure you're using current realistic rents when you do your #s as well.