Back in the day I was obsessed with building a real estate empire. My plan was simple: Buy 10 rental properties, collect $1,000 a month from each, and ride into early retirement with a cool $10,000 a month passive income.
All was going well until about halfway through when I bought property number seven, I realized I wasn’t building a dream portfolio — I was just collecting headaches.
So after studying other investment avenues, I found a better path that matched my lifestyle.
Here’s why I sold all my rentals and moved my money into boring ol’ index funds.
1. Maintenance headaches
I mostly bought small multi-family properties (duplexes and four-plexes). And while these can be great because of higher cash-flow potential, the maintenance is a lot.
With four units comes 4x as many toilets, 4x refrigerators, 4x AC units, etc… Basically 4x the problems vs. a single-family house. Even with a property manager handling the day-to-day, I was still paying for every repair, replacement, and emergency call (as well as the property management fees eating into my cash flow).
Index funds, on the other hand, don’t have leaky faucets or broken microwaves. They just grow in the background while I sleep.
2. Real estate has massive transaction costs
Every time I wanted to buy a new rental, I had to save up a $50,000+ down payment. Then there were closing costs, make-ready expenses, and cash reserves I had to maintain for each property.
Basically I found that building a real estate empire was a slow, cash-intensive grind. Big chunks of money upfront, and long waiting periods in between buys.
Index funds are way easier. And cheaper! I can invest in chunks as little as $100 at a time, or even less if I want. Better yet, my brokerage account doesn’t charge trading fees, and the index funds I invest in have a tiny expense ratio.
My favorite brokerage is Fidelity because it’s beginner-friendly, doesn’t charge any account fees, and offers some zero-expense-ratio index funds. Actually, Fidelity just got given our best overall stock broker for 2025 award! Read my full Fidelity brokerage review now.
3. My returns weren’t actually better than index funds
One of my longest-held rentals I bought for $195,000 and sold it 15 years later for $400,000. That’s a pretty amazing appreciation rate, around ~5% per year.
After adding in cashflow, leverage, and accounting for all the transaction costs, my final ROI for the property worked out to be around a 12% annualized return. Not bad!
But here’s the sobering part — When I sold that property, I compared my 12% return to what the S&P 500 delivered during that time frame. It also grew by an average 12% per year. So after all the tenant issues, maintenance, and financial juggling, I ended up with the same returns I could have gotten from a simple, diversified index fund. Not cool.
Don’t get me wrong, I’m not complaining about my profits (many real estate investors make far less). And I can’t expect that same 12% average going forward from index funds.
But for me, all that effort and risk buying a rental property doesn’t make sense from the returns that I experienced. I’d prefer to shoot for a solid (and stress-free) average return with index funds.
4. I wanted more diversification
Having most of my net worth tied up in just a handful of properties never felt great. If one tenant stopped paying, or if I had a vacancy that lasted more than a couple months, it had a big impact on my finances.
But when I buy an index fund, I’m spreading my money across hundreds of companies in different industries. Yes, the stock market as a whole can be volatile. But I’m not overexposed to any single property or sector.
5. I wanted more liquidity, too
Rental properties can generate monthly cash flow. But I never found them to be very flexible when I wanted to access large chunks of money.
Like, you can’t sell off “one-twentieth” of a duplex. You either need to sell the entire property, or take out a loan to access equity. That’s a hassle, and it’s not exactly quick.
This is why I love index funds. I can sell tiny portions or large portions of my portfolio, almost instantly. In fact, last year this really came in handy when I needed $20,000 to buy our family minivan. I was able to sell a small portion of our portfolio, without the need for a loan or many months of saving.
Simple investing fits my life better
Real estate investing taught me a lot about building wealth. But it also taught me what I don’t want as I get older and retire.
Chasing deals, managing tenants, and handling property repairs were all manageable (and sometimes fun!) things when I was younger and more ambitious.
But these days I’m looking for less headaches, more freedom with my time, and more flexibility with my funds. Index funds give me all that.
If you’re ready to simplify your investments and start building long-term wealth, open a brokerage account and begin your index fund portfolio today.
