The downside is less volume and higher price points with higher initial costs including longer vacancies.

While the profit margins are smaller, we have almost a 0% vacancy rate, low expenses and no management fee.

In over 40 years I've experienced 6-7% annual rent growth, 9-11% annual appreciation and not one day of vacancy or an eviction! 

If you want to purchase rentals you are going to need that extra cash for an emergency fund in case you need to replace a roof or a water heater goes out, or for any vacancies because these things will happen.  

Based on my rental analysis I can increase rents by $10k per year over what they are currently getting (but then I need to add in vacancy which in not included in the actual rent reported)

If cash I can only pay $120,000My reasoning on my numbersRetail $150,000less 4 months vacancy for prep and sell ($5600 rental loss)no realtor for me, don't really need theirs (3 to 6 %, 4500 to 9000)repair to showing condition savings, staging (at least paint $3000)I am saving them between $13100 and $17,600 on costs plus time $$$That is why I am targeting $120,000 purchase price. 

Though our margins are lower we have almost no vacancy, no property management and low expenses.

I've figured that I need to account for it as part of my expenses (similar to vacancy and property management allowances) and calculate my cash flow on this.

.  ($100/night with 25% vacancy = $2100/month ÷ 50% $1050/month.  

After PITI, there isn't much room left to allow for repair and vacancy reserves.