The only ignorance here is your own. Again, believe what you wish, it does not alter my reality or the facts of my experience. And if you are dumber after reading a post that you disagree with from someone on the interweb, that sounds like a personal problem on your part. Good luck with that.
OK Here you go for me: Purchase price: $164k. 25% down. 6.62% interest. Rent: 1625 -- P&I: 784.00 Taxes: 194.00 Insurance: 27.00 (dwelling policy) --- Positive Cashflow: 620. After Maint (100), Vacancy allowance (162) - under your assumptions: 358/mo. Thats a 1% rent to purchase price model in socal buying a bank owned foreclosure. God those taxes in Florida are rape. Why would anyone in their right mind spent $2700/mo on rent for a $150k property when they could rent a $600K property in San Diego for the same? (yeah that is mid-end here in SD, and I consider it absurd) This is evidence your rent ratio needs to vary depending on insurance, taxes maint, and other costs. ie Texas property is cheap, but the prop taxes are out of control. So you need a lot more rent. Florida is cheap but flood taxes are out of control.
Who are you renting these unbelievable dumb deals to. 15 illegals or a bunch of guys running a meth lab. Barring the renter being involved in something highly illegal I don't see any reason for him not to buy his own place. On the flip side maybe there are some really dumb, lucky for you renters out there.
Part of it is location. This area is literally walking distance to the beach, so the rents are higher. Also, remember that it's not really a $150k property under normal circumstances, I just got an insane deal. And yes, the taxes are insane. Unfortunately, the appraiser's office down here doesn't count foreclosures as legitimate toward calculating assessed value (they use "reasonable market price under normal market conditions" ), so I'm getting raped. Right now they're assessing me on a value of $450k on the property. I'm hoping next year gets assessed at $300k if I'm lucky.
Because some people like living in a really nice house where they can walk to the beach, and it's extremely difficult for a lot of folks to qualify for a mortgage these days, unless they've got a ton of cash for downpayment and flawless credit, and even then many people are getting turned down.
Annual/Monthly Expenses Property Taxes $2000 / 167 HOA $2040 / 170 Insurance $2100 / $175 (guesstimate) Easily find a qualified professional at $850 a month / $10200 a year 10200-6140=4060 left for P&I, Maintenance, repairs and vacancy. It does not leave much for a residual cash flow. Rents need to rise!