[USER]

I’m contemplating between two investment paths: buying rental units or investing in VTSAX (Vanguard Total Stock Market Index Fund) and taking it easy. I’d love to hear your thoughts and experiences on which option might be more lucrative, less stressful, or better suited for long-term financial goals. Any insights or advice would be greatly appreciated!

Thanks in advance for your input!

[Aaron]

For me it’s not a apples-to-apples comparison.

I do both (rentals and vti) but the rentals are what’s allowed me to leave my job and get a bunch of time freedom and control over my own time in general. Index funds wouldn’t have done that for decades. You also have the opportunity to achieve higher returns based on your own skill.

I like index funds also. I see buying those as complimentary. It’s insurance, it’s taking Chips off the table, and the index funds are like another form of reserves to support my rental portfolio if some kind of horrific event happened all at once

[Nicholas]

It is a lot more work managing rental units than you may think after doing a number for some time. Even hiring a manager sounds easier than it is as they will still want to check in often and charge you far more than you think they should. I finally sold all of my units to invest in passive index funds. The rentals were profitable but like a second job.

The investments take care of themselves.

[Aaron]

Both for sure! I have 32 rental properties and a hearty VTSAX account that I have on auto draft to buy a big chunk of every Monday. Remember it’s all about multiple cashflow/revenue streams to do FIRE right so you aren’t having your worry about what the market is doing everyday and how much you can withdraw etc. you want $ still coming in when you’re FIRE’d!!

[Derek]

For me the decision was betting on myself vs the market.

The result is that I’ve done great with commercial real estate.

[Monique]

Both. Why leave money on the table? I think most are drawn to one or the other, and have their reasons for doing so. My uncle did both growing up, so that’s what I thought an investor was. There are pros and cons to both, but do the one you’ll stick with consistently. That’s the most important.

How will you commit? Fire is not big on real estate, so you’re asking a securities leaning crowd.

Don’t miss: Why VTSAX versus VTI versus any fidelity analog? Not sure where to focus or does it matter?

[Robert]

BOTH! Find you a good property manager. They will take 10% off the top; but I’ve had mine for 30 years, and she is worth her wait in gold.

[Lee]

I have both but as I am getting older I would hope my RE and VTSAX + other mutual funds would have a 1:1 ratio. It’s 4:1 now. Cash flow from RE would be more than sufficient for us to live a comfortable life so I stop investing in RE (unless it’s a phenomenal deal) and only invest in index funds.

[Patrick]

Totally agree that holding both types of assets is ideal.

However, I do like to give the “dark side” of RE when things go south. Over the course of 10 months both my rentals got hit so hard (tenant passed away in one, eviction in the other, foundation issues and extended vacancy due to influx of inventory.) I went from cash flowing $700(after 30% kept in reserves) to “losing” about $18,000 😱 (paying multiple mortgages after exhausting reserves to rehab one rental and carry lost

rent on both rentals.)

I had a strong reserve account that was wiped out and then had to use my personal EF to carry things forward.

I am finally in a spot where things are evening out and starting to rebuild my monthly cash flow, but it was hell of a season!

Definitely made me rethink my strategy when I retire if Ill be leaning on rentals for income

Proposed: VTI vs. VTSAX: Which is better for a brokerage account vs. a retirement account?

[David]

If you are going to hire a property manager and run it 100% passive, you are probably just as well to buy index funds. If you want to self-manage and take a more active role you can get better returns in real estate.

[Paul]

Best to understand tenant/landlord laws in the state your potential rental properties are in. Some states are very anti landlord. It can be very difficult to get rid of a bad tenant. It’s very easy to get rid of a bad stock/fund. I would do anything in CA. My properties are in TX.

[Yujin]

1 repair can wipe you out. 1 tenant can turn a rental unit into a nightmare. 1 bad PM can cost you thousands. If you can handle the risk, go for it, if you don’t want to be bothered, then passive index investing.

If your goal is to at least have exposure to real estate, look at REITs and Real Estate Syndications.

[Author]

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