On average the payout is 4% or so over the life of the policy.  4% sounds pretty good when compared to bonds, and it is basically a guaranteed dividend, so long as the company backing it remains solvent. 

Car wash?

One thing you are missing though is if a property manager does things right, the repair mark up will wash out.

What kind of return was he going to get on his $1500?

If you don’t do the 1031 I’d say it’s a wash.

If he did, it would be interesting to know what that amount was. He

So the "average down" argument is a wash, one can do the same in either.

Cash flow is to make sure you stay solvent with real estate.

Of course, then there are the easy cases, like when I called the last landlord for this guy who shouldn't be living in my rental, and his first statement was "he was full of horses**t."

The best it can do is wash out your current payments from the DTI calc.