Your argument uses an overpriced rental. This is an example of twisting numbers to make a point.
The landlords on this forum use a GRM of 8 to determine whether a home makes sense to purchase as a rental. If a unit can be rented for $2200/mo., then a reasonable price to pay for it is $211,200. (2200 * 12 * GRM of 8).
My rental is $2200/month, and it is worth $450K. The landlord’s PITI is $2658 *, and his repair/maintenance costs are $375/month. So he is underwater by $ 825/month.
He is also losing equity. The place was worth $575K in January, but now a similar unit listed at $500K has been sitting since February. He is losing 10% of purchase price annually, in addition to losing money on the cash flow.
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*Calculations. The landlord would be paying, at 6.75%, $2918 according to an online mortgage calculator. In the first year, the after-tax interest paid is $1670 (450K * 6.75% – 34% tax rate). Less than $400/month goes toward principal, according to the amortization table. So the after-tax interest and principal is $2070. Add HOA $180, property taxes of 1.25% (after taxes .825%) = 468, homeowners insurance = $ 100, total = $2658. Now add 1% for repair/maintenance = $375.
