To reiterate something that Another Reader said: if you are going to do rental RE (especially small-time RE where you just have <5 houses or something) you want to be *beating* stock market returns by a fair amount. Why?
-The houses are illiquid. If you have an emergency and need money, you can sell your stock/bond holdings in a day or two. Not so a rental property.
-The houses are potentially really risky. A house is sitting in one place. A really bad tenant, an act of god natural disaster, or a general exodus from the neighborhood/town/area can drop your investment to zero (or worse, since you might not be able to sell and still have to pay taxes and maintain it). Just like buying stock in just one company, concentrating a lot of money in one place is risky.
-Even if you outsource *everything* you will need to do a significant amount of work. Unlike an index fund where you can rebalance once a year (or not even bother if you want to pay .02% more to do a target date/self rebalancing thing) and otherwise forget about it, a house is going to have problems, need new tenants, etc. Your management company (which you need to do the work to hire in the first place) will have to ask you what to do on at least some of these. Don't forget the upfront work to pick out the house you want to buy and actually buy it, nor the work at the other end if you decide to sell. Both can easily use up weeks of your time (deals fall through, inspectors find problems, contracts have to be renegotiated, etc).
For those reasons, if you're going to do real estate, you want to pay close attention to the 1% and 50% "rules". You want to be kicking the stock market's ass, not just making a little money after expenses. Otherwise, you're not making your money work hard enough, and putting in too much work yourself. That's not the point of investing!
-W