Certainly, but as someone not there everyday and with cash I need to put my cash to use, getting over 4.5% return with long term growth potential seems pretty good. Of course, you do have to have a renter for this to work.
I believe that one can pay cash in San Diego today and clear about 4 % after expenses on rental property if self-managed. Examples would be Clairemont or Mira Mesa properties in the ~400-425K range renting for 2000-2200. Getting 6% or more gross. Assume about 4500 for property tax, 1500 for insurance and 200 per month for maintenance puts it right in the 4% range.
Certainly buying today for 20% off 2005 prices and making 4% compared to money market funds in the 3% range might be a feasible part of a well-balanced portfolio and a decent inflation hedge. This only makes sense to me though if the property is say 25% or so of your portfolio. So it might not be that crazy an idea.
Personally, I think most investors would like to see another 10-15% or so price decline (or 15-20% rent increases at current prices) before considering the jumping in (assuming current interest rates and rental rates). At that point 8% or more gross on property would surely look pretty good, assuming short-term interest rates (t-bills, money markets) in the 4% or lower range.
