So first of all - walt's answer. Real estate has risks that holding equity does not.
Second, this:
Why can't i compare the return to the "4% swr"?
For example, this house once paid off, would return ~6%. So, if we hurried up and paid it off, $100k would give us $550/month asap, where we would need ~$150k for the 4%swr. And we wouldn't need to touch the $100k to get it.
Is it because that $100k won't grow like it would in stocks? But does it matter? Wouldn't we just be buying an income stream?
Or is it the whole "work/risk" thing again??
Partially, yes. But another big problem is you don't know what the SAFE withdrawal rate is, even if you have a return on investment.
In other words, let's pretend your return is 6%. Your
SWR
* might be 9% (i.e. you could spend all of the income from the property - the 6% - AND cash out refi equity every few years due to the property value increasing, to give you a total yield of 9%), or it might be 3% (i.e. you can spend half of the 6% income you're getting, and need to reinvest the other half in order to make it the money keep growing and last long term).
*Safe as in - it is sustainable long term
If you're in an area where prices stagnate, rents don't rise much, and inflation outpaces them, your SWR is
lower than your yield. That is, you may be earning 6%, but if your expenses and costs rise faster than inflation, you'd better be LBYM, saving a good chunk of that 6%, and plowing some of those proceeds back into more investments to keep pace, or in 20-30 years you'll be hurting really, really bad.
So we use the word "safe withdrawal rate (SWR)" fairly loosly, usually to mean "WR" -- but the actual safe withdrawal rate is the rate that is sustainable long term, and that might be more or less than your ROI. You can't just go "I'm making 6%, I can spend 6% without eating into principal, I'm good" - because of inflation.
We had a good discussion on this once here in the forums, but I think it'd be quite difficult to find now. Hopefully that made sense though.
With the above caveat though, often real estate often
does let you FIRE with less invested (though I wouldn't call it a higher WR, but if you did divide the amount you were spending by the amount invested, it would look like a higher "WR") though. I touched on this in the podcast interview I did on stocks v. real estate.
Link if you're interested. It talks a lot more about the positive upside and potential higher WR you can have with real estate, if you're looking for the sunny answer (this post is more the cautionary answer).
So again, it's not an apples-to-apples comparison. You need to judge it on its merits, rather than versus something else that doesn't apply.
Going back to walt's answer, if you take your yield and spend it
all, you could - at some point - hit a immediate big problem (expensive issue insurance doesn't cover, lawsuit, etc.), you're in a really tough place. If you take your yield and send it all, you could - over time - hit a slow developing problem like inflation eating away at you, or property taxes or materials/labor for repairs rising faster than rents. Real estate has these risks, and you need to prepare for that. If you've been saving a chunk of your return from RE into other investment vehicles, it'll help you weather those storms. So that will lower the "WR" you actually should be taking, and is yet another reason why you should demand a higher ROI than simple equities, to cover those risks and the necessary extra yield/amount needed to invest to do so.