@Larry T. Great question. I was just wondering the same thing...searched the forum and here it is! Love BP.
Anyway, imagine you have $100K to invest. Why pick real estate? Let's put passion aside for a minute. Many of us are into real estate because we enjoy the challenge, love the work, whatever. But speaking strictly on a financial basis, does it really make sense.
Option 1 is to invest the $100K in one or several rental properites with a 10-15% COC, giving you $10-15K per year.
Option 2 is to take the cash to buy and flip. I'm not sure what kind of return I can expect here, but it will depend on how many deals you can find and crank out. A random guess says as a beginner maybe 3 or 4 deals a year once you get some momentum (maybe less?), netting 20-30K each? So you can earn a $60-120K.
Option 3 is to put it into any other business...maybe a tech start up that can turn into the next big thing, or perhaps your neighborhood pizza shop or barber shop. Depending on the type of business your income growth is limitless with that initial investment and without the need to continuously look for the next deal. I did a quick google search (because the interest is always right) on barber shops. One article claimed the national average income for a barber shop owner was about $30K, but another had several examples of barber shop owners making $80-200K per year in net cash.
Personally, I'm like many of the others here. Real estate is only one faucet of my financial plan. I like the numbers involved in real estate, I enjoy finding and closing deals, I enjoy the interaction with other (most, but not all) real estate professionals, and like the idea of an asset generating income for me without much effort after the initial push (assume you property manage, hire contractors, etc.).
Curious to hear your thoughts.