It looks like people are doing them everywhere but walk ability is a big factor.

For those that own properties free and clear, or even those that are financing, do you factor property taxes into your formulas?

Many investors would not be excited by your example.The answer relates to risk tolerance; supply vs demand; and other factors (location, location)...But sure, one reason why investing in Real Estate works is because renters keep on renting!

I don't think you have anything to worry about California - ie, earthquakes.  3% net annual cash flow is pretty low but would be much higher if you factored in appreciation.  

That will be the biggest factor in determining seasonal demand up here.

I don't know much about Michigan other than i hear property taxes are high so you had better be factoring that into you plan! 

Factor it in, see if it is worth the costs.Con- Time- If you do plan on selling, get ready to be floored by how much there is to learn.

Key factor is - what is it actually worth to YOU and YOUR DEAL.If you can't get it for the price you require - then pass on it and find another. 

If you dont always want to manage it I would still factor in PM costs so you know if it will still work when you decide not to manage it anymore.

As stated above, cap rates are basically risk factors.