Where Did All the “It’s Okay to Overpay” Crowd Go?

[Chris Seveney]

A few years ago the message was everywhere: it’s fine to stretch on price because appreciation will make up for it.

Many buyers did exactly that. Some purchased with seller financing with low down payments, which made the acquisition easier. The assumption was simple: lock up the property now, rents will rise, values will continue climbing, and the numbers will eventually work themselves out.

But a lot of markets have shifted since then.

What we are seeing in many cases is a different reality:

- Purchase prices have largely stalled in some areas

- Insurance costs have jumped significantly

- Property taxes have reset higher after sales

- Maintenance and labor costs are up

- Interest rates are much higher for anyone needing to refinance

For buyers who entered deals with minimal equity and thin margins, that combination can create pressure quickly.

Seller financing and low down payment structures can be useful tools, but they do not fix a property that was purchased at a price where the fundamentals never worked to begin with. If the deal only worked under the assumption that rents and values would keep climbing, the margin for error becomes very small once expenses start rising.

This brings up a few questions for the community:

1. Are you seeing properties bought during the peak struggle under rising operating costs?

2. For those who bought with seller financing or very low down payments, how are those deals performing today?

3. Has the increase in insurance, taxes, and maintenance changed how you evaluate acquisitions now?

4. Are buyers seeing these properties on the market and being able to get them at a decent price?

One of the lessons that seems to repeat every cycle is that creative financing can improve a deal, but it cannot turn a bad basis into a good one.

[Bo Smith]

You nailed it. The assumption that appreciation cures everything was always flawed, but it got buried when deals were still working on the upside. Now that the math has to work day one, those overleveraged deals are showing cracks fast.

I've seen this exact scenario in markets like Austin and Phoenix. Property bought at 2023 peak with seller financing, minimal equity, and now the owner's sitting there watching insurance jump 40%, taxes reset 30% higher, and cap rates that don't exist. The deal never worked on fundamentals--it only worked on hope.

What matters now is acquisition price discipline. You can't fix a bad basis with creative terms. We're back to boring underwriting: does it cash flow now, without appreciation? If not, it's speculative leverage dressed up as investing. Are you seeing owners in your market actually lowering asking prices to reflect these cost realities, or are they holding and hoping the market corrects?