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Also I just realized if I took out the 600k cash by selling my home and taking the equity and putting it into some kind of other investment and do a 4% withdrawal rate that's only $2,000 a month. Right now the property allows me to spend 2800. I definitely agree with the idea of diversifying for the future I still just have a hard time seeing it and making the jump"
you may be confusing passive withdrawal rates with active business involvement aka real estate. when you deal with real estate you are taking on significant liabilities (i.e. how many evictions have you handled? how many legal complaints (lawsuits) against you? how much police involvement you had to deal with because of your tenants?) just because it have not happened (yet) don't ever think it can not or is unlikely to happen - if you tenant(s) stop paying (they have hardship, medical issues, or any hosts), do you understand what it takes to get them out? willing to be the heartless b%stard of the landlord (in the eyes of the community/church/whatever) to kick out starving children ? what happens if tenant or their guest falls down and claims you knew or should have known that your property presents a risk of X,Y,Z or simply because they see you as deep pockets? I had plenty of close friends dealing with real estate and learning these through school of hard knocks. tenants had domestic issues, weapons were pulled, police called in , doors, busted down, tenants stopped paying ,etc. Now in Milwaukee suburbs you can buy houses for 40-60k so completely different price levels but do not kid yourself for a day that real estate ownership is in any form 'passive'. you are paying with sweat labor, with liability you carry 24x7 , and through active involvement. you do separate your real estate assets into some form of legal entity, correct? or is everything owned by you directly meaning that should there be a risk exposure all of your assets are at risk?
none of that exists with mutual funds, if major company (i.e. BP oil spill) does something stupid, you personally is not on the hook for anything, liquidity is way, way higher. no toilets to deal with, no drug busts, no non-paying tenants.
now, if you really want yield, there are REITs , various utility partnerships, close ends funds, and plenty of other security instruments yielding higher than 5.6% rate you referenced (2.8x12 / 600 =5.6%) . you take on higher risk, less diversification , but still much higher than real estate.. true you do not get depreciation , or any other benefits of real estate if you go that route..