I've never heard of someone renting property for less than what they're paying on it, thus as long as the tenant is paying -- they should be paying and have money left over. My guess is more debt than they could handle (America, FUCK YEAH!) and something else got more priority than your property.
I'd love to have property that makes me money by simply existing.
The problem is the extra land. The tenants were paying for the house and not the off-limits land behind it. So the owner was probably in the negative a bit. They probably used the equity to buy other shit like bone said. I've been looking at lots of forclosed places, and many are 1/2 to 2/3 of the way through major renovations considering the houses' values. It's sad, but to be honest - fuck the stupid greedy people. Most of them got what they deserved.
Duplexes in city areas are where it's at. My parents used
some of their house's equity along with cash to buy a duplex, spare time to fix it up themselves, rent one half to a respectable dike, and the other to my brother (he does the lion's share of rehab work). The cash from the one tenant is almost enough to cover the monthly payment & bills for the place. My sister did a similar thing, bought a duplex with decent older tenants in it, rehabed it, and pay almost nothing to live in the lower half.
I want to get a decent house to fix up a bit, get a room mate, then use future equity & a future increase income and get a duplex to rent. It's not as good as stock market investments, but with prices as they are, along with so many losing homes and becoming renters...you really can't lose. The only risk is if you don't have the appropriate insurance or buy a money pit. Or rent to nignogs.