Remember, urban housing prices have gone up in flagship markets in the last 10 years, but that's not necessarily true of many urban areas, especially midsized cities in the Midwest and Deep South... esquire, typically you wouldn't be tying up much capital. This is the typical real estate investment that I would make. Purchase condo (or duplex, etc...) for, let's say $250k (this may be in Long Beach, Tustin, HB, etc...1000 sq/ft, 2 bdrm, 2 bath) Let's say we're putting 15% down, or about $40k, and we're not paying any agency fees or the like. Total including closing costs, we're in for about $45k. The condo will rent for about $1500, give or take. Let's just assume that we're able to get a decent rate, somewhere around 4.5% which will yield a payment of approximately $1350. Management/upkeep fee for the condo is approximately 10% (on the high side, but let's just say) so basically this is a revenue neutral investment. You are only on the hook for about 1% of assessed value per year, but in California (with Prop 13) this is going to be $2500/yr regardless of the value going forward. Let's assume that you're getting 7% appreciation per year (which is very low for this area, but we'll consider a long term situation) Given these parameters, you're looking at a capital appreciation per year of $17500, on an initial investment of $45k, less the $2500 that you pay in property taxes, and you're building equity that can be used for future borrowing. In this type of situation, you are not tying up capital, rather, you're increasing your equity, while having someone else pay your mortgage. This is of course extremely simplified for the purposes of this discussion, but you should be able to see my point, that if you can find an easy to rent property, you should do fairly well.