Also, do not forget the opportunity cost of the lost down payment. For example, 20% of 400K is 80K which will return $4K in interest when invested in no-risk 6-month CDs in the first year alone; that number grows of course as the interest compounds. This can offset some of the tax break (the interest is taxable) and effectively lowers the current rent. Shares or bonds could return even more of course. My guess is that the true cost of the property assuming a normal lending environment (20% down, 6.5% interest) is more like $330K and maybe less.
