Real life comparison: 150K rents $1000/mo vs 300k rents $1500/mo

[Perry Z.]

I have a friend who just purchased a 300k SFH (3bd, 2b) in Elk Grove, a nice suburb of Sacramento, and is renting it for about $1500 a month. He told me that every month the rent broke even with the mortgage and expenses, and at the end of the year he probably puts in about $300 in property taxes + fees. Basically, at the end of the day, his return comes from the appreciation of the house, which is currently at 5+% in that area for that kind of house and the rent increase next year.

When I heard this I am a bit shocked, because my strategy is completely different. I would buy something around 150K 2bath/2b in lower income neighborhoods in Sacramento, rent it for $1000 and maybe even $900. With property management fees I have about $100-$200 a month in cash flow. Those properties probably appreciate at the rate of 2-3% a year. 

What do you guys think?

Cheers,

Perry