Acquiring Rentals in an Appreciating Market

[Dan M.]

In a market that has quickly appreciated over the past three years, I am looking to obtain cash flow properties. If I run the numbers on an income-property and the cash flow is acceptable as well as the long term ROI, some would look at the calculations and say that's a good deal. My concern is acquiring one of these properties at the price they're asking, and then the market calming down again and I now have a home that is worth less than I'm paying (negative cash flow).

I feel like the houses I'm seeing are not worth what everyone in town is asking. How do you determine the actual value of an income-property so you pay the best price for when the market goes back down?