How are people making money paying these prices?

[Kyle McCorkel]

I've been ramping up marketing significantly over the past few months and now I'm starting to directly compete with some of the major wholesalers and flippers in the Central PA market.

I keep getting feedback from sellers that I'm just way off from the offers made by some of these other investors.  By so much, that I feel like I must be missing something.

A few examples:

1. Pre-foreclosure property, judgement balance of $155K, ARV was $220k (best case). The place needed at least $60k in rehab. Seller said he had an offer from another investor at $160K.

2. Probate property on about 2 acres of land. Nice 2200 sq. ft. home, but needed completely updated, including a brand new forced air HVAC system. My rehab estimate was $120K, ARV was $300K best case. My offer would have been in the $75K-$80K range. I walked through at the same time as a local wholesale/flipper, and his offer was $170K.

So, how are investors making money paying these kind of prices? Are they wholetailing? Maybe for example #2, they planned to subdivide the land? Once I figure in rehab AND holding/closing costs (including interest/points), I just can't understand how people are making any kind of money while paying this much for property.  These aren't newbie investors, these are major outfits.  Are they wholesaling to newbie investors (making it an even worse deal for them)?

What am I missing here?