Part of it was my narrow definition of the word “investor,” I was thinking of those with money to invest as opposed to those working a strategy and leveraging, you are right, both groups exist. In your example, the 1996 investor wins because they start with 135x and could have refi’d to below 100x, the buyer at 4.75 is kinda stuck at their level. When both sell, 1996 wins again, the profit from the increased equity is more than double. Neither are stupid but an investor today should walk past the 190x opportunity because they can find better rent multipliers elsewhere with the same interest rate. Your example is still a decent investment, but in 2009, as long as you are not investing in S.D., you can find that 1996 scenario.

A few weeks ago I posted on another thread a bunch of 1k rentals for 100k, I just found a 900 rental for 60k. At todays rates, they start out cash flowing far better than the MM example, if you find a 50x example in Florida, you’d buy that before my 65x example. There are a bunch of post bubble busted places seeing intense investor activity, often times money coming from outside the area or state that the property is in. When that MM place hits 225k, investors will scoop them up by the dozens and provide a price floor, but at 325k, just locals will be there, it will still support prices but not in the same furious way that sub 150x will.

I am making this stuff up as I go along, but a few months ago, when my area began to regularly see 100x, buyers poured in, Forbes ran a story and declared Murietta and Temecula as the #1 and #3 hottest markets in the country, I tried to figure out why, and I think that when the rent multiplier gets so low, money shows up. If they ran that story today, it probably moved to whatever area that just hit that rent multiplier, perhaps florida or northern/central cal will be next. As prices fall in S.D., there will come a point that the sideliners will need to buy before the investors show up in large order, that range will vary between 100 and 150x