Originally Posted by TheDarkKnight
But one month is just the average - if you go several months, you need that $2000 a month of your own cash. I don't know many people with $2000 per month of truly disposable income!
I plan on maintaining an emergency fund which would cover 3-6 months of vacancy. I already have such a fund that covers that duration of my personal expenses so I'm confident I can be responsible enough to maintain a vacancy fund.
There is no diversification, and managing a property is like running a small business if you do it yourself.
I'm also regularly contributing to a balanced 401k portfolio which should provide diversification. Agree with the small business part (regarding above, any well run small business will carry a cash buffer), I don't expect it to be a passive investment but should be manageable part-time.
Would you take out a $360k debt to buy a portfolio of shares, if those shares paid you "a rent" back? Very few people would, all things being equal as it's not something they can see and touch, despite (again assuming a fictional rent was paid to you) equities giving a great deal of diversification and being very liquid.
It's not a question of whether someone would, but if they are able to... not many places will lend you 80% of your capital to invest in the stock market (at least not at a rate that would make it easy to return a profit), but an 80% loan to invest in real estate is easily available at a good rate as it is secured against an asset the bank can sell if you default.
Good points. It's making me think and consider if my plan is realistic, or preferable to just sticking it in a 401k.