So I guess my question is this.... I had always thought eventually I would own 10 rental properties....so assuming I don’t want to manage these properties, should I just buy more index funds instead? Seems so much easier. Like way easier... I’d love thoughts from those who have been through this. Thank you!
They are two different investment classes, really. Index funds are truly passive (i.e. require zero maintenance whatsoever except for rebalancing, and VERY minimal effort at tax time unless you're doing some manual tax loss harvesting.)
If you don't want to manage the properties (or pay someone to do it), then you should just buy more index funds.
However, we're in a bit of an unprecedented rally on the index fund side (for both REITs and Equities/Bonds).
So, even though the index funds have been outperforming your physical rentals up to this point, many people would agree that will not be the case over the next several years (although no one truly knows).
Really, it all comes down to overall asset allocation and how active of an investor you want to be.
Personally, I took a middle of the road approach and invested in a multifamily syndication. I get the tax benefits (depreciation, 1031 exchange, etc.) of a physical rental, but have zero day-to-day obligations to it. It's also "less risky" than a single family home since no individual tenant leaving impacts the overall revenue significantly.
Of course, my cash-on-cash return is diluted because a syndication takes a fee up front for putting the deal together and a continued cut of the revenue.
But, personally, I'm a passive investor--I'd rather add more dollars to my portfolio doing the job I love than take on a job I would not love (being a landlord) for a few additional points.