rentals as investments

2% is the new "killing it". But don't worry: price appreciation will take care of you, until the cap rate becomes 0%, when you'll be able to sell to the people who must have a mauve wall and can't figure out how to do so while renting from you instead. Good luck!

(Yes, that was tongue-in-cheek. You are asking the right question, but you will not get what you are looking for yet.)

Yes the cash buyer can earn a whopping 2%.

The strange thing is that the cap rate on publicly-traded commercial real estate (NAREIT Equity Index) has soared over the past year to about 9%.

Just can't figure out Manhattan residential real estate. I figure it's around 3%. That's cool if you are confident that prices will appreciate 7% a year - but that's just crazy. But that's the sort of thing that happens when you have a bubble.

Caveat emptor!

Its an equity market now, not an income market like the 1990s... Appreciation like you said. If it needs to be priced by income investors its a long way down... Figure cap rate no lower than 5%.

And equity markets are a lot more risky than income markets.

REIT yields got down to about 4.5% before the great fall. Their pricing assumed healthy future capital appreciation. Prices are now down ~50% in about a year and yields are ~9%. They assume virtually no future appreciation and no future earnings/dividend growth.

A bird in the hand is worth two in the bush...

Stress condo values across a 5 to 9% cap rate range and be horrified. Like every market, people shouldn't expect Manhattan real estate to bottom until zero appreciation is priced. Why should the equity yield be lower than the mortgage rate??? Its effing insane. Use 6% and you get to 11x rent and down 40% plus from here.