Elganja
Platinum Member
- May 21, 2007
- 2,143
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A paid off rental is the worst way to make money in real estate. After all the expenses I bet he'd make less than half what 200k parked in an index fund would make.
The great part of real estate is leverage. If OP cashed out and used the money as down payments on 7 - 10 cheaper houses or or in my area you could get a really nice 24 unit building at 30% down and have money left over. If you buy right in this scenario you could double even triple the return of an index fund.
I work for rental property owners I know a guy with 150 low to middle class single family houses and I know a guy with 135 low income units split in 8 to 24 unit buildings/complexes. The difference is night as day the buildings are way less work and dude makes a killing. He can do most of the work himself where the single family house guy has a bunch of contractors and management.
A 12 unit building has one water heater, one boiler, one sewer main where 12 houses have...
The guys with a few single family houses do nothing but bitch and complain how my bill to fix the a/c will keep them from making money the whole year. For one they probably didn't buy right, you have to take that sort of thing into account but with rental property you need volume. You have 30 units one bad tenant/repair gets absorbed, you have one unit, 1 bad tenant/repair completely screws you.
i can only tell you from my personal experience -- it's is more then "worth" it to me on a small scale ... not saying to invest all your eggs in one basket, but diversity is good
to your other point, i don't disagree that selling and buying more units is the way to go-- however that is a much larger undertaking then what the OP is taking about