In your example, the ARR calculation suggests a positive return of 12.5%, but in reality, the investment suffered a loss of $50 over the two years.

The reality is both play a key role in your asset management plan.

The slab and walls in reality likely add no value to the property.

It seems there are a lot of low/middle class people trying to invest in real estate but the reality is that RE is a rich person's game.

Reality is banks actually finance less than 50% of mortgages.

Thank you Ned, that is exactly right, we actually check a condo/townhouse about 2 weeks ago, the thing was a condo with a basement, I cannot tell if it was a condo or townhome, anyway, the ceiling in the first floor was bowing, the 2nd floor, one of the bedroom was sinking, could not tell how this damage was done but the walls came apart from the floor, you could see the roof of the unit bowing inwards towards the structure a bit, and their "general contractor" estimate that for 5k they could straighten the property and level everything, even 1 window and 1 door looked so uneven that you would think  there was something wrong with your eyes...5k for structural damage, good luck with that one, we ran as far as we could from that....but we have seen they do inflate their ARV, since we learned the hard way , we go through these deals with a magnifying glass, I knew I was not so picky, numbers do not lie.Another thing that caught my attention, which I do not know if I am overly suspicious now that I am older, but they want to get the closing for us at the same time/day they are getting the property from whoever they buying it, which it seems to me they try to save on the closing by having a "dual" closing when in reality is just 1 closing and we are the one paying for it...I do not know there are few things that do not click right with this folks.

Vrbo.Agree with others that have said your global perception of vrbo clientele is not reality although could be for certain areas.You need both regardless. 

Or is that not how it works in reality?

Out here in the west its simply impossible to build anything that will sell for much less than 500k when your lots start at 100k to 200k each then permits are 30 to 75k each.. then you build the home thats the reality.. only way fed helps there is to buy private land and subsidize or turn federal lands into developments. the one market that would work is VEGAS as its surrounded by federal land.And from what I see in west coast the regional builders are back to pumping out spec homes as fast as they were pre GFC..

But its very rare to be able to pay retail today and expect it to cash flow positive - even though you're sinking your 20 or 25% down.