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They expect to make money on the appreciation of the house's value.

I don't think mine is losing money since it's been in a family trust forever. But most landlords aren't making any money. Everyone has owned properties forever and taxes are really low for them. If you're in that position it doesn't matter but it doesn't apply to a rent or own debate for current renters or potential homebuyers.

But yes most landlords out here are lucky if they break even. They take tax write-offs and hope for appreciation. Cap rates in Cali are super low and prices are really high.

They probably have a massive prop 13 subsidy.

Yeah it's in a family trust and they haven't done any major renovations. Taxes are lower than they should be. But even if taxes were zero, it still wouldn't make sense to buy this place for 2M+ when rent is only 4500. For 4500 rent you need to be around 900k max purchase price. If it's an investment it should be way less, like 450k.

I've rented 4 different homes in Cali and 3 were owned by family trusts. The one that wasn't made nothing and she ended up selling to get out. I rented that house for $3600/mo and she got 925k for it.