Newbie question on a 2 unit, live in

[Ebe Chinweze]

Hi all,

First thanks for all of the contributors to the forum, great advice that I've come across. I'm new to REI. I have a question and what I think is a unique situation(compared to the rest of USA). We live in DC and are interested in REI. The market here is, I suspect, potentially overpriced(compared to Chicago, where I'm from). We've come across an old 2 unit(we would live in one unit), not renovated, that could rent at $4000 month, priced at 620K. Either way I look at it, either through CAP rate, or CoC, spreadsheet analysis, I could not offer more than 450-500K and feel that I've gotten a good deal. Yet people are willing to buy comps in this area around the 600K range. Thus competition here is fierce. So my question is, for markets where the price to buy in is so high, is it worth the investment because of other factors, i.e. desirable location, low vacancies, presumed high appreciation? How are investors in high priced areas, with lower cash flow sleeping okay at night, is it more speculation? Is there [i]any way to get this deal to work that I'm overlooking? Please advise, thanks in advance!

Ebe