Convince me please!

[Santhose Subramaniam]

Up until last year I had a rental property in NJ.  Yearly return was about $9000 after property taxes, mtg interest and maintenance fees- property worth about 270k.  Thats about 3.6 percent pretax return.  I took the money from the sale and invested in VNQ - real estate index fund which yields dividend of 4.5%.   I didn't have much problems with the tenant except the occasional maintenance meet ups etc.  

So Please Convince me why investing in actual real estate is better than real estate index funds and REITS?    Is it just NJ?  Since NJ property taxes is very high, it probably ate into my profits...Is it the case for other states?  

Do you recommend any out of state real estate investment opportunities?  i.e:  invest in another state on properties that is favorable to landlords and have a property mgmt company manage them for a fee and still break a 5% return at least...