Willingly Buying Lots of Negative Cash Flow?????

[Brian G.]

I put in a LOI on a property that was turned down today. It's a multiunit property that had an asking price of almost 400k, based on my analysis the most I could offer was around 140k. So, I offered a bit less than that and it was turned down. The broker told me that I'm looking at the property as numbers on a piece of paper and that others buyers are willing to pay 300k for this property. He claimed he could sell the property tomorrow for 300k, but the owners wouldn't go for it. So, out of curiousity, I ran the numbers for a 300k purchase price at 7% for 20 years. The PITI payment is roughly $6,660 dollars, when the GROSS RENTS are only $4,370 per month! So, this is a long winded post to ask WHY would anyone pay 300k for this property??? The broker was trying to tell me it's because I don't know the area, etc., but regardless of area, why buy a property that in best case scenario is going to lose $2,300 a month?