My two cents:
Finding Deals: When properties hitting the MLS are constantly going over asking, that is a sign to me it might be the time where we should be getting creative, putting in the effort to find great deals that dozens of other people are not actively competing against us for. Just recently (Tuesday) I asked my landlord if he would be willing to sell (he said no), and now I'm going to my friends and seeing if they think their landlords would be willing to sell. Just a 5%+ discount off the FMV is thousands of extra dollars in equity now, and probably more down the road. At the very least a small discount is a buffer should market prices decrease. If you do not use a realtor, that is even more money the seller could keep and you could save (if you agree to split the savings between the buyer/seller). I used to always wonder why anyone would sell off-market rather than use the MLS, but now as an investor & landlord, my business partner and I see some of the advantages.
Financial Analysis: I live in Somerville right now, and as you can imagine, everything here is insanely expensive; I think I would be lucky to find anything cash flowing at even one-half of the 1% rule (I am thinking of this from an owner-occupied/rental property perspective). It is important to know how the property in its current state would cash flow, where you think it will cash flow under your management (pro forma), and what the break-even cash flow would be. If there is a decent buffer between your pro forma and break-even, that is a good sign that even if the market did sour a bit, you have some wiggle room to stay afloat. This is why I would advocate for some better cash-flowing markets like Worcester, MA (2nd largest city in New England), or Providence, RI (3rd largest), where the ratio of Rent to Fair Market Value is more favorable.
