"That said, some people will tell you that real estate isn't passive income in the classic sense. That's because owning physical real estate takes work. If you own rental properties, you have to maintain them, make sure your tenants are paying on time, address issues as they arise, and cover a host of expenses. The work may be worth the money, but it's work nonetheless."
"In this Reddit post, an investor who owns $1.1 million in rental properties wants to know if they should sell them and put their money into a portfolio of dividend stocks instead. The poster says that owning rental properties isn't as passive as people might think. Is the poster making a smart choice trading real estate for dividend stocks? That depends."
"Although it's easy to see why the poster may be inclined to swap rental properties for dividend stocks, there are some drawbacks. First, the poster is earning $100,000 a year from their rental properties. Even with $1.1 million in investments, it's hard to earn that much from dividend stocks. The poster doesn't say if their $100,000 a year in rental income is net of all expenses. They only say it's net of property taxes."
Owning rental properties demands active management including maintenance, tenant payment oversight, and addressing issues as they arise, which creates ongoing work and expenses. Dividend stocks offer greater passivity and liquidity, requiring only portfolio monitoring rather than hands-on property management. Real estate carries risks such as vacancies, rising property taxes, and unexpected costly repairs that can erode income. Generating $100,000 annually from $1.1 million in dividend investments is challenging given typical yields. The decision hinges on weighing trade-offs between passive income, liquidity, expected yield, expense assumptions, and tolerance for active management and operational risk.
Read at 24/7 Wall St.
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