Yeah, he did make his profits on resale. He bought while the market was still on its way up and he could see there was room for growth – that’s what justified the slightly higher income multipliers. The better locations contributed to his decision only to the extent that it meant there was more room for growth. When the sales volumes dropped off he started selling. That’s what a smart investor does – they buy while its on its way up and they sell as close to the peak as they can.

In a rapidly increasing market, some investors will even accept a negative cash flow for a short period of time because they know they’ll make up for it when they sell. Once that situation changes, so also changes the price an investor will pay.