To me this seems like a bad idea because of the tax treatment. In short, you have all the downside (all rent is income and tax accordingly), and none of the primary residence benefits such as free capital gains on the increase.
This was what jumped to mind when that ridiculous book rich dad poor dad started going on about how a home was a liability and it's better to rent.
Two situations:
#1) You buy a home cash, you live in it. The return for this 500k or whatever investment is a) free place to live b) free capital gains
#2) You rent out said home, and then use the rent to rent an identical one next door. Except now you have to come up with 40% more on top of your net rent proceeds to cover the income tax due on this income, and you face another large tax bill on it's sale.
According to RDPD, situation #2 is better since you have an asset generating money, and are renting someone else's liability that you can easily rid yourself of. That's why I took issue with the book and particularly that point, is that it completely ignores utility value and tax consequences of such a setup. If there were true tax fairness, anything an asset generates would either be taxed on its market value, or not. Funny how depending on what exactly a home generates ($ vs personal accommodation) it is taxed differently.
Finally, I rent, but income come from hands off market investments. If you want to go the RE angle, make it a business with multiple properties, such that you can treat it as such for tax purposes, and have it run wholly hands off. Or just buy REITs.
One of the finance podcasts I listened to made the salient point that if the only way you can make a property look attractive is by doing the renovation/rent collection/management yourself, then you haven't bought an investment. You've bought yourself a handyman's or a property manager's job.