Appreciation Only (poor cash flow) Investment

[Billy Zhao]

A duplex that had their deal fall through three times. I did the calculation. For it to have a decent cash flow ($150/mo per unit), the offer price will have to be about $50k below the asking price. And yet, the seller agent just told me that they went into contract the 4th time with 5 competing offers and all of them are above the asking price.

My guess is the investors from places like California are banking on the market appreciation to accelerate and within the next 5 years and the value increased plus the weak cash flow is still a good investment.

The appreciation of these properties is driven primarily by the availability of cheap credit. As long as the total availability of money supply is not reducing, then the price of homes will continue to rise. Sounds like a sure bet.

What's your thoughts on this?