Is one rental worth it?

[William Hutchinson]

It seems that rentals are only worth it when you can do the domino effect to get a bunch of houses and be on the line for a bunch of debt. I have a full time job, and can get a house for 50k and get about 9000 in rent per month. From calculations and other research, it looks like I’d make about 15%. That is good, but it’s a lot more work and risk than buying an index fund that should average about 10%. (Also the rent would be taxed around 25% because of my tax bracket, and it seems like depreciation and other write offs would only cover 3 or 4K each year)

Is my math off? Or is it silly to just have 1 rental property (paid in cash). The numbers just haven’t looked good enough (or about even) for the risk and extra work.

[Greg M.]

There is nothing wrong with having only one rental unit. A significant number of landlords only own one property - usually their prior residence. 

The way I read your post, you have $50K and are looking for an investment. Nothing wrong with buying an index fund. It's a relatively safe and stable investment. If you like real estate, you could buy a REIT fund. This is much less work that owning real estate. Few people get rich playing safe or not working hard.

Personally, I think you are looking at investing in real estate all wrong. A $50K house is not going to be in a nice area or attract quality tenants. It's not an investment for the faint of heart. Why not look into buying a $250K property, maybe a duplex, using the $50K as a down payment, and then renting it out. Buying right can have the rent cover your costs, potentially provide free cash flow, all the while the tenants are paying off your mortgage and building up your wealth. Just principal reduction alone will generate an 8%-9% return on your money the first few years.