Analysis: Leave Roth IRA Alone or Use Contributions for Rental Property?

[Tecmo Super Bowl]

In another post I was saying how I don't have money to get started in real estate.  Then I remembered that I have $25K of contributions in my Roth IRA that could be withdrawn at any time.  Made me wonder if it would be wise to use that money to buy a rental property.

I did some analysis and would love to hear the community's input on what I missed or what looks funny.

Goal:  Determine if $25K should be left in a Roth IRA to marinate in index funds for 30 years, or if the $25K should be plucked from the Roth and tossed into a Real Estate salad for 30 years

Scenario 1 - The Marinate Strategy
Assumptions
-6% return
-30 years
-25,000 investment

Future value in year 30 is $143,587.  No taxes owed.

Scenario 2 -  The Real Estate Salad Strategy
Assumptions
-Purchase a $70,000 property at 25% down (17.5K) using the $25K from the Roth for the down payment, closing costs, and any rehab
-Mortgage for $52.5K at 30yrs/5% for a monthly payment of $282
-Hold property for 30 years and rent
-Property appreciates 1% per year
-Rent increases 3% per year
-Rent begins at $700/month
-Operating expenses are 50% of rent (goes up as rent goes up) (does not include mortgage payment)
-Self-managed
-Real estate profits are taxed at 25% marginal tax rate
-After-tax profits each year are invested at 6% until year 30

Future value of rental profit investments in year 30 is $147,674.  Also own paid-for house worth $94,350 in year 30 that produces $5k per year of after-tax profit. 


So, in comparing these 2 choices, it seems like real estate is the winner.  Do you agree?

I have done some research on these forums and seen people say that you should leave the money in your Roth and let it grow tax free rather than use it as a down payment for a primary residence (couldn't find anything about using Roth contributions for rental down payment).  I wanted to run the numbers and see if that's true.  Granted, real estate would be a lot more work than passively investing.  I think I need to account for management expenses in here, or paying myself to manage, but am not quite sure how to add that in. 

[NoNonsenseLandlord]

Factor in a bad tenant that costs $10K.  Factor in the fact you need to get paid to manage the property (if you are managing for free, I have 24 you can manage).  Factor in the fact you cannot spend the rental and go on vacation.

Do your Roth.  Save extra money for RE.

[arebelspy]

It's not an apples to apples comparison, the real estate is a lot more work, and a lot more risk (especially using leverage, as you are in your example).

I have pulled money out of a Roth for real estate investments, and I'm very glad I did so, but I had specific investments to use it for.

Don't pull it out for a generic idea, see what you actually have lined up, and evaluate if it makes sense to withdraw the money at that point for that investment.  In the meantime, save up as much as you can so hopefully by that point you won't have to withdraw it, and can use it to show reserves to the mortgage company.