Yes Washington,New York,and California for example are all overinflated markets.Many investors purchase there on the on an appreciation gamble than the CAP rate.I have many investors buying down here because they can leverage their cash for so much more greater returns than where they live.In some areas that I mentioned acquiring the land is the real goal and the CAP rate is an afterthought.Here in Atlanta the only 7 to 7.5 cap I am seeing is CORE assets in trophy locations.Example A class newer multifamily that a REIT or PENSION fund is buying.

Otherwise you're real estate gambling not investing.

Also, appreciation is somewhat of a gamble.

Like in gambling, the house always wins over time.

Appreciation is a gamble whereas cash flow helps with later financing (improving your income numbers) and is more of a guarantee even if there's really no such thing.

@Brian PowellI do not know why you would take such a gamble. 

It's a fishy situation because your gambling on the fact that both tenants will maintain their jobs and continue to make the same income.

But these are friends and family that took a gamble with me on my venture so I feel wrong to increase my rate.

``````````````````````````````````````````````````````````````````````````````````````````````````````````````````````````````````People that are behind on payments and PITI is more than market rent and have no equity is a real bad gamble.

Chalk this one up as a "win" from a knowledge perspective, and move on to better cash flow opportunities (unless I'm missing something on the appreciation side...but I would caution there is a fine line between appreciation investing and gambling!).