I bought a house in 2013 and sold it in 2016 for a total return of probably close to 50% -- not including leverage, after factoring in avoided rents and all costs. If you include the leverage, the ROI was probably >100%. What's more, the cash I invested was at the moment of my investment significant with respect to my net worth -- something like 33%. So this was a great outcome.

However, that does not mean I made a wise financial decision. I made a lucky financial decision, which is very different. This article is about making wise decisions, and it's very hard to reason about this from results in a single investment.

I just want to add that a lot of people account very poorly for their real estate profits. Whether that number is good depends on how leveraged you are and the value of the property, and many other variables, like your costs and (unknowable) future vacancy rates. (If you have a lot of leverage and the property is only worth a little, that's great! It would not be very good in a scenario where the the property is paid off and worth $2M.)

My leverage wasn’t that bad. To close I had to spend about $4,000. No down payment. It’s an FHA 30-year fixed at 3.85%, so I bought really at the bottom of the market. I’ve got a great tenant and about to renew them for another year with no increase in the rent. The income from that has been a god send and I’m net positive on expenditures. I’ve managed to get 3 months ahead on the mortgage payments to account in case I DO have a vacancy and need time to find soenone. I just got extremely lucky. I bought out of a fear of being homeless (for whatever reason) and to secure a foudnation for myself as I grow older. It’s become much more and I’ve learned a helluva lot.

I'm sorry, but the numbers you're putting out there indicate that you might be a person who does not understand how to value their investment property. The typical baseline number to have is one of the expected or historical cap rate. The terms of your mortgage and down payment are almost wholly irrelevant. And leverage is often considered good in real estate investing.

> I made a lucky financial decision

Also known as speculation

At the time I didn't think of it as speculating. I thought of it as "buying a house because that is what people do at this age in these life circumstances." But I agree that there are some interpretations of your word choice under which my actions would fall.

I mean, in the past 7 or so years, all the boats have been rising. What would your returns have been if you put them in stocks? How great was and is the risk you take by taking tenants versus the risk you take by buying stocks?

You do both to diversify (equity and real estate). Having the property as a rental is very tax efficient as well (you get to depreciate a property that appreciates in value). Also, no one is going to let you leverage equity purchases with debt like you can with real estate.

Disclosure: I own several rental properties to round out my investment portfolio.

You don't really need to do both to diversify. There is a lot of exposure to real estate in the stock market (rental companies + commercial real estate + construction), and REITs can be used to gain more exposure if desired.

I can manage my real estate risk better (IMHO) in a rising interest rate environment better than a REIT can (and I find most REITs to be overvalued, specifically O). My cash on cash returns are better as well.

Yeah, but can you diversify by location better by yourself than a REIT? Lots of cases of individual cities and neighborhoods going to pot while the rest of the nation and world prosper

My goals differ from a REIT slightly in that I want a quality return on investment, but also want to be able to live in my properties around the world as time permits (I’m a remote worker).

Returns vs utility is an acceptable trade off for me.

With stocks you don’t get leverage. Cash on cash return on real estate far exceeds stocks. If you put $20k down on a $100k house and you profit $300/month, that’s $300/month on a $20k investment, NOT against a $100k investment. That’s 18% per year not counting the equity as well as (possible) capital appreciation. Not to mention the tax advantages due to depreciation. Stocks are nowhere close. If you have a property manager charging 8% of the rent, you then have a cash flowing asset with almost zero hands-on work.

But the article does note that there's a gigantic subsidy on the leverage for stupid reasons, and the huge amount of leverage is obviously and empirically dangerous.

The sneaky best thing to do is buy a small multifamily unit, live in one, and rent the others. One of my coworkers at the time I bought my building was shopping single-family homes in the exact same price range, and we have almost the same monthly costs. The difference being that my tenant essentially pays my mortgage, and I only have to pay the taxes and insurance. Down the road, when I have a family and buy a real house, the rental will bring in $3k or more every month.

You also have additional deductions on expenses that you don't get on a single owner-occupied home. In fact it goes in a different Schedule than personal. One chooses a percentage of personal and business, which might be 50 50 if each unit is about the same and the owner is in one, while the other rented out.