Income vs CMA approach...am I overpaying?

[Eric Zdanowski]

So I'm currently analyzing an off-market lead and need help pinning down a fair market value to determine what I can offer. 

Backround: This property is a SFH, but due to it being in a college town and consistently rented by students, it commands much higher than market rents ($2500/mo). Now, the seller is a sophisticated investor and works as a commercial loan officer, so he based his asking price ($225,000) off of the income approach using an 8 Cap. When I ran a CMA, however, comps put this property in the $180k-190K range. The thing is, even when I run the numbers at his AP, the deal more than meets my minimum ROI and Cash Flow criteria. My concern is that since this technically is a residential home, it would appear as though I am overpaying based on comparable sales. My worry is that this takes away my margin of safety and can affect my ability to finance/refinance.

So my question is: Is it unwise to pay more than comps would suggest, even if the rental income can justify the higher price?

[Michael Le]

It's not an off-market lead if you're paying above market price. Are there absolutely no deals on the local MLS? At all? I assume there is something listed at market price on MLS. I assume there is nothing so special about the area that you couldn't rent out something else just as much. So why not just go buy something at market? Not my normal advise but better than paying above market.