MLS asking prices for small multi-family (2-4 units)

[Steve Uhlig]

I am currently looking at small multi-family properties with 2-4 units as by-and-hold investments in parts of CHESTER and Montgomery counties. My question is concerning the current asking prices on the MLS. The listed properties are all priced very high compared to their ability to throw off free cash flow. When you factor in rents, vacancy, expenses, reserves, and debt service most of them cash flow negatively at asking prices. I don’t know what sale prices current owners are actually getting for their duplexes, triplexes, and quads but I imagine it can’t be too far below asking price. My question is this: Why would an investor pay these high prices only to acquire a property that will lose money over time? The asking prices I’m seeing on the MLS seem to have little to no relationship to free cash flow. Any thoughts on this topic for a brand new real estate investor would be appreciated. Thanks in advance!