A few years of above average appreciation and people are assuming it goes up like this forever.HISTORICAL APPRECIATION= 3 to 5 percent, basically keeps up with inflation, unless you have external factors, such as large population influx, big employee opportunities moving into the area etc.

@Matthew Paul for that money that you have allocated to real estate investing, aren't you actually losing 2% a year to inflation.

To me, that is keeping up with inflation if you're closer to 3%, so I'm thinking 5-6% is probably more appropriate with rising taxes, cap ex, etc, etc.

I see too many wholesalers trying to "co-wholesale" other properties, or over inflate the ARV, or under estimate rehab costs. 

Or should I be looking at it in the sense of, if it's higher then inflation of 3-4% then I'm good?

Not to say that it isn't because, plenty who earn that top 1% income, often inflate their lifestyles...but if financial freedom is your goal...your income matters especially in a HCOL area. 

If you perform the repair personally, you have to be reasonable in charging fair market rate. eg. if it takes 1 hr of your labor for some handyman's work, $20-30/hr is reasonable, even you're probably paid much more in your own line of work.My suggestion is to first fire the PM who obviously wanted to skim some profit by inflating the repair cost while exposing you to lawsuits (remember you're in CA - a blue state and San Jose - a city with rent control).

I am definitely wary of the fact that the seller doesn't have any docs to show and my agent doesn't want me to pursue the property because she thinks the numbers they ARE sharing are inflated, but it's in an area that I want to settle in for the long haul and that I'm quickly getting priced out of.

I've been seeing investors make good money in Manchester as well as a little more north where there seems to be less inflation in property pricing and people still need good affordable rentals.

We are in the same boat with our highly inflated market in Portland but have achieved our rental and flipping goals by working in the Midwest.