Key word down payment. You put 200k down on the rental and get 200k in rent. You pay 1.6 million on a 800k loan and own the house at the end. Without appreciation, you are 600k in the hole
I don't understand where the 1.6 million came from. If you're talking about interest on the loan, the premise was that the rent covers the mortgage payment (interest and capital) plus maintenance plus returns some net cash. In that case, when the net cash has returned enough to cover the downpayment, you'd be richer by the entire value of the house even without appreciation.
So, for your 200k downpayment, you now have 200k * 1.047^35 = 1MM as the total house value that you own even without house appreciation, so almost a 5% rate of return.
