Options include driving for dollars, absentee, probate, using listsource if you are not in a competitive market, buying lists that are exclusive for your market type  3) Start a sustained direct mail campaign.

We have recently seen an influx of investors from out of town, which shows me that the 3-4% cap rates, with negative cash flow, in the bigger markets of California aren't going to be very sustainable.  

I only ask as anyone bank, lending institution, private lender etc... would like to see that you are aware of what it takes to operate and sustain the business as you will be "owner occupant".  

So, all of this to say that though nothing in life or investments are guaranteed, there are some companies out there with stellar track records and means by which these things can be analyzed to make for a fairly safe bet, at least in so much as a sustainable dividend payout goes.

My question is, How sustainable is this run up in prices locally? 

and how does your company sustain overtime with these "lifetime" warranty as if the customer experience any problems with foundation, you will be called and you will have to provide the support. 

The key to avoiding the situation you are talking about, and rightfully so because it can be a dangerous situation is to buy properties that can sustain their income, in markets that support that sustainability.

A market is considered overvalued when home prices are at least 10 percent higher than the long-term, sustainable level.

So if your end product is 40k  lets break it down.. not a sales pitch or what you want to hear.your turn key company or provider is going to want to make at least 10k.. that's common in the industry.. that leaves 30k to do all this... your contractor putting it all together wants to make 3 to 5k.. so that leaves say 25k to put it all together.to have a sustainable rental.. you need New mechanicals new roof.. sewer scoped and replaced if needed up graded plumbing and electrical.. new paint and flooring.. cabinets and appliances and hot water heater.. this all cost at least 15 to 20k.. leaving you to pay 5k for the asset...

You just have to learn how seller financing benefits sellers so that you can propose it to them in a way that resonates from their perspective.