Rent is not the only return of concern to investors, as most are in it for the long haul hence capital appreciation forms a bigger part of the equation (coupled with the tax benefits on cgt). In saying that, you must be able to analyse and understand the market in which you are investing, that is if it is Richmond know what is happening in Richmond – everything from median house/unit prices, recent sales, what's on the market, time on the market, price reductions, vacancy rates, current rents etc.
As for rent being the great leveller, for residential property it is not. Other factors do come into consideration eg location, location, location (transport, shops, schools, facilities, services, recreation etc), just because you have a six bedroom/1 bath house (on a main road) does not mean that you will get more than a four bedroom/1.5 bth house located 2 streets away in a quiet location.
One specific reason that many country properties may have a higher cash return compared to thier city counterparts is the lack of capital growth (you may still find cashflow neutral/positive properties in some of these areas (including some city fringe areas). You would be hard pressed to find a house returning 5% net yield on a cash basis in say Surrey Hills (but it's total return {cash + cap gain} may be in the vicinity of 8-10%) whereas a house in Omeo may well give a return of 7% rental but only 1 or 2% capital gain pa. Then again, you may buy in Bendigo or Karratha and be lucky enough to score a 'company lessee/exec rental' or some interent miners as tenants – generally these people work in a town for 1-5 years, are well paid but do not settle down in the areas that they work, they will prefer to pay higher rents than to pay a mortgage.
