Who buys overpriced multi-families?

[Mike Austin]

Hi,

I'm a new investor and have been browsing for my first investment. I have what might be a dumb question. The properties that I have come across in my area are pretty price inflated. Who buys these properties and why? The cash flows are all negative, and the rents are already at market rates. Is there something I'm missing? Somebody must be buying these up if they're able to price them this way, right?

I'm browsing MLS based sites... is that the problem? These are retail, and not investments?

Thanks!

[Steve B.]

"investors" in hot markets who are chasing appreciation.  They can be recognized by using "Cash-on-cash" returns as their primary financial metric and they hope to sell to somebody also willing to overpay down the road. Also known as "the bigger fool theory".