1) yes, index investing is great - when you have cash. 2) Why not leverage equity to put down 20 percent and borrow $$$ from the bank in order to make more money? Aren't you essentially creating cash flow in exchange for a low interest rate on a loan? I can't see why this wouldn't be a great approach.
A couple of things:
1) Investing in real estate still takes cash. It's not just 20% down, it's also closing costs + renovations. Also, the bank doesn't tend to give out a bunch of 20% mortgages for investment properties. They sometimes want 25% or 30% down.
2) This is true, but the caveat is that this only works if your cash-on-cash return provides a higher ROI than it would in an index fund. This means you annual rate of return, after factoring in all cash invested and expenses, should be 10% or higher.
- Cash invested includes your down payment, closing costs and short term repairs invested.
- Expenses include all Capital Expenditures, vacancies, property management fees (yes, this too), mortgage, taxes, insurance
If you're making over 10% annual ROI considering all of those, regardless of appreciation, it's worth it. Basically, it really boils down to the specific numbers.