It used to be, way back before the year 2000, that if you had a house CF over $50/month you would happy, and rationalized it to be a good investment because of depreciation and appreciation.  

I have seen all manner of sales material over the years and many do not put any maintenance in or vacancy in the proforma.. they rationalize that a fresh rehab and fresh tenant you won't have that .. well MAYBE in year one then the reality sets in and your 12% preforma becomes a 6% reality.. and then maybe investing in fixed debt looks better and better all the time..

They'll be more likely to try to beat you down to $90K (even if everyone agrees that $100K is the "right" price) than if they see you paid $90K.It's a tiny bit rational, but mostly irrational.

Within this property management software it allows me to enter the amount  of the utility bill and it actually calculates each tenants portion based on the ration that I put in.  

First, for the rational reasons, he is probably in a fairly low debt service situation with good cash flow, so what is his motivation for giving it away.  

@Joe Villeneuve  Valid points I agree with your rational in your example, but lets say you are a Buy and Hold investor and your goal is to build life long cash flow.

Too many times, I have seen HELOCs as way to rationalize a bad deal (the old hey I have 100% financing so it must be good).  

Given, that, and assuming your debt to income ration would not prevent you from getting another mortgage, you best option would be to save up the down payment for you next purchase.

I'm watching homes that cost less than 100k (many less than 50k all in) and cash flow North of 400-500/months...with a PM in place.I read about others looking for that magic formula to REI, and trying to rationalize a short term loss (negative cash flow) with a long term growth (equity build) and I keep wondering what their plans are for life while they wait for this long term exit.I get to watch, and smile, because here we get to take advantage of both.  

Obviously, this won't encourage the less rational folks to move out, but hopefully you've got someone with a bit of sense.