Or would they be equally content with paper assets in the future?

We’ve been tossing around the idea of converting one of our bedrooms into a gym (treadmill, weights, bench, etc with towel and water service).

You get the benefit of 2 years+ of appreciation, tax free gains, protect yourself from buying in a crappy neighborhood because it looks good on paper - you're going to live there...the best test for a good investment location is if it is a desirable place to live - and your risk of running out of cash is lower because you can take your time.

I have one tenant who on paper takes in more than enough money to cover rent, but she's always having problems because in her words, if she has the money in the bank, she spends it.

Their paper assets, on their paper accounting, can't pay the bills because they lack the paper to pay them. 

As long as you have a primary housing expense (either renting or own) you will be able to use 75% of the appraisers opinion of the future rent. and you will be able to add back a decent portion of your paper losses on your tax returns for the properties you already own using this form:  https://content.enactmi.com/documents/calculators/Form1038.C... 

Looks very good in paper. 

I was trying to go for cash flow (on paper)  but I'm losing money every month, not sure when these properties will stabilize.

My understanding is that you don't need a license to buy any paper (notes). 

When you study this area in economic texts and in academic papers, there is quite a lot of govt intervention on behalf of all sides (tax code isn't 12,000 pages for no reason and it usually isn't helping the renters)Let The free market act as it normally does, there are more multifamily units coming online this year and next year than ever before in US history, despite rising insurance and property taxes and construction and labor costs, as the potential for profit is too juicy to ignore, but The developers and investors also bear the risk of loss.