If 20% down for an Investment Property, is REI really worth it?

[Jung Kim]

Hi been studying RE as an investment option and trying to figure out the numbers. Could someone check with my numbers to see whether I'm thinking about REI correctly? I can't seem a large benefit of REI in a case where you have to put 20% down in an average market.

Ex:

20% on $500k move-in ready duplex where about $1k cash flow (ideal scenario)

Assumptions - 6% housing appreciation, Stock 6% appreciation (conservative estimates)

Profit

• - House appreciation 6%/year
• - Mortgage paydown and it's 6% appreciation/year
• - Cashflow invested back into mortgage paydown
• +/- tax deductions

Expense

• - interest payment, taxes, home insurance, maintenance ~ roughly 1k a/f deduction (conservative est, probably alot more)

VS

Opportunity Cost
- Down payment 20% = 100k in mutual fund 6% return/yr
- $1k/month expenses that could be contributed to mutual fund

Yes there are still alot of variables

- housing and stock appreciation/return will vary depending on location/time/stock
- did not exactly calculate out the tax deductions / expenses but made a conservative estimate in favor of REI
- did not include time and fees dealing with REI transactions vs just working a few more hours at my job

What i'm seeing is that in a scenario where someone will not be building sweat equity or finding a crazy discounted deal on a property and going through a conventional 20% in an "average market", the argument doesn't seem as strong for REI vs mutual funds/stock - they seem to be pretty close if you take into account the variables mentioned above. However, I can see it being a fair investment if you wanted to replace your income and slowly retire from working.

I know this forum is mostly filled with REI enthusiast but I wanted to find a realistic picture of REI for the average person in an average market who will not be fixing up any houses.