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I can't get past the idea that, if you work well in your job, you may get laid off or fired, and companies do not like to hire you when you get past the age 45 or 50. But if you invest in some houses or rental properties or fixer-upper, a lot of people can do well and be financial independent. So the meaning of life is being a landlord (and dealing with tenants)? It seems like it will make life lose all its meanings.

What is the truth about this?

I think this might be an instance of "survivor bias" in that you only tend to hear from the people who were successful at it and made a lot of money off of it. Conversely you don't hear as much from the people who lost their shirt trying to flip a house or those who couldn't secure tenants at a good price.

If you're interested in the idea of passive real-estate investing (where you work with a property management firm who handles the purchase, upkeep and renting of your house and gets paid a fee from the proceeds) this article is pretty good.

But even the people who advocate for this approach make the point that you're probably only earning about 6% interest/year on your investment. At that rate I feel like you'd be better off just parking your cash in index funds and making ~10% per year with comparatively less risk.

What is the truth about this?

Pretty much no truth.

At 48 years old, I received an offer for a job where I was paid far more than any other employment I had previously. I chose it over two other competing job offers that were offered at a very similar time.

While I was laid off from that job, rather abruptly, I had a new job within a short time at age 52. About four weeks from the start of job search to my first day. The important part was I had sufficient savings to cover this emergency. Shortly after that, I also picked up some part time work that allows me to replicate the salary made at the former position. Additionally most of the people I work with, are newly hired and older than I.

Historically most people earn the most in their 50's and 60's as they have become experts in their field. That is the normal. Also is that if they lived a somewhat frugal life style they have a paid off home and cars (no debt), or a very large savings balance (like over 1 million). Some people were savvy enough to obtain both. Those in really good shape, financially, might welcome the layoff!

Keep in mind, that being laid off by a company, after a long history does not include the same harm that it once did. When pensions were very common it might mean a drastic decrease in retirement income. However, with 401Ks and the like it does not matter as much. If you are able to market yourself well, a lay off may mean a raise!

Sure there are stories of those being laid off and unable to find new work, but there could be reasons for this. Did they stay up on the latest technology? Are they willing to make less then the job they were laid off from? Are they part of a dying industry? Is their job function subject to automation?

Real estate is a business, like any other. It requires skill and knowledge. Profits are not guaranteed. In fact a highly leveraged real estate business with little experience is very likely to lead to bankruptcy. The same could be true if one opens up a clothing store, pizza place, or auto repair shop.

Leverage devours income. Inexperience leads to mistakes that also decreases income. The combination of the two are deadly to business solvency.

I get the appeal of real estate investing and it is a big part of my retirement strategy. I like owning property because it is a thing I can go and interact with, it feels more permanent and real than the numbers in my retirement/brokerage accounts.

The fact is, though, plenty of people retire happily owning no investment properties. Being prepared for retirement is more about a lifetime of living below your means and investing prudently.

As far as investment performance goes, real estate results vary wildly. I believe that with adequate preparation and capital you can achieve fantastic results, but I would not suggest that it's the right fit for everyone. I'm a DIY type who enjoys fixing things up, so handling things myself makes being a landlord a part-time job in addition to my full time job. Perhaps I'd be making more if I sold the rentals, invested that all in the stock market and delivered pizzas part-time, who knows. Plenty of people have lost significant money on real estate investments, it is not a guaranteed path to wealth. There are nightmare tenants and declining housing markets that can financially ruin you. There is potential in real estate, and there's also a lot of competition/risk, don't believe anyone who pitches a bulletproof investment strategy.

The sales pitch:

A few decades ago, I had a friend that was starting out in real estate investing. He explained his reasoning like this:

1. Buy a starter home. Get a decent house/condo, with the best rates because it is an owner occupied purchase. Live there for 5 years.


2. Buy another house, get some renters lined up for the first place. Renters cover the mortgage on the first house, you buy another slightly nicer place.


3. Rinse and repeat.

The idea here was that the renters pay all the mortgages, and after 30 years you own the house outright, so the rent becomes residual income. So for the average Joe without a pile of investment capital, this is the way to create wealth. A little bit of borrowed money here and there, and it multiplies with itself. What could go wrong?

Mugged by reality:

Good renters are good. Bad renters are... a nightmare. Roll the dice, do your due diligence, but at the end of the day, the people you do business with can be a huge liability. Can you afford to cover two (or more) mortgages, repairs, etc., during and after a protracted legal battle to evict a bad tenant?

What about a recession? What if you lose your job? What if your tenants lose their jobs? What if rents go down? What if the real estate market collapses a la 2008?

What Pete was explaining about leverage is this problem that if you borrow money from someone else, they expect you to pay it back (mortgage payments) and though they may be sympathetic that your renters aren't paying you the money they owe you, at the end of the day they're going to repossess your property and ruin your credit rating if you can't keep making the payments. Borrowed money always comes with risks. Investing in real estate isn't a silver bullet that will magically make you rich.

It works for some people, but it is a second job to be a landlord. If you want a second job, there might be easier side-hustles out there, but this may be the one for you.

Several other good answers that get into the details, but I think there are a few obvious things that need to be said here:

• 
  Real estate isn't a risk-free golden ticket - investing in real estate involves a lot of risk. It's easy to fail at it, and then you have nothing to fall back on.


• 
  Having a career with a skilled job isn't as dismal as you've made it out to be - If you've worked at a skill for a long time, you will be marketable. Assets (real estate) can always be lost or devalued, but if you know how to work, you can always earn money.


• 
  People who write books or promote income strategies are usually better experts at selling themselves than they are at the thing they're trying to sell - people who hold real estate investment seminars, or write books about investing in real estate, are trying to sell seminars and books. A best selling book is a best selling book. It may or may not reflect any value in terms of you making money.


• 
  What matters most is having a strategy, understanding the risks you're taking on, and making good decisions with your resources. In a comment, you mention that 50% of Californians do not have a retirement fund. This is because they did not decide to have one. It doesn't mean that "normal" jobs like being an engineer are a bad way to build wealth.

Let that last point sink in for a minute. It doesn't matter if your money comes from a salary for being an engineer, or rent from being a landlord, or from selling hot dogs at the stadium. What matters the most is making good decisions about how you spend or invest your money. Jobs or investments are just means to an end.

No. You have an overly pessimistic view of holding a job, an overly optimistic view of real estate investment, and you don't even mention other alternatives.

Sure, you could get laid off from your job. That's stressful, but it's hardly the end of your life. Get another job. If you have marketable skills, this can be quite easy. I was fired once, and I got another job in about 2 months. I've never been laid off but I did once quit a job because the company was going bankrupt and it was obvious that a layoff was coming. I've gone through, let's see, 10 jobs in my life. I started my current job when I was 53, so it's hardly impossible to find a job after 45.

Some people make a bundle out of real estate. Others lose a bundle. I used to own a rental property as a sideline to my day job. I lost money on it every year until I finally bailed out and sold the property. I lost money every. single. year. It is not the magic money maker that some people seem to think. I've seen lots of discussion on this forum and elsewhere where someone calculates how much he'll make on a rental property that are wildly optimistic because they make very questionable assumptions. They assume that they will always have a tenant -- that they'll never, ever have a time when someone moves out and they don't have a new tenant moving in the next day. In real life, it can take months to get a new tenant. They assume the tenant will always pay the rent. In real life, it's not at all uncommon to get tenants who don't pay, and then you have to go through the eviction process. They make very low estimates of maintenance costs. If you are a skilled carpenter, electrician, and plumber and you can do all the maintenance yourself, and your time is worth nothing, maybe some of these estimates are plausible. But if you have to pay professionals, well, I think I'd get sick to my stomach looking at what I had to spend on maintenance. Etc.

What about other money making opportunities? There are many kinds of business that you could start besides a rental business. What about starting a laundromat, a law firm, a dog-walking service, a aircraft factory, etc, for thousands of other possibilities?

On your philosophical comment, "So the meaning of life is being a landlord (and dealing with tenants)? It seems like it will make life lose all its meanings." Even if it was true that being a landlord is the secret to financial success, you seem to be confusing "best way to make money" with "the meaning of life". The meaning of life is to get right with God, live for his glory, and enjoy his blessings. Yes, you have to make money to survive, and it's good if you can enjoy your work and get some satisfaction from it. But that's not the meaning of life. You need shoes to walk around, but that doesn't mean that the only reason you walk around is to get new shoes. Okay, I'm sure others on here will disagree with me about the meaning of life, but I suspect that few will say that it is make money.

The thing with property, is like any other portfolio, you ought to diversify. And most people can't afford to diversify when they start in real estate.

Real estate investments can be good. I sold an apartment that had been paid for entirely with the bank's money, whose interest and other costs had been paid by the same renters from day 1 (and who decorated!) and the tax free[1] profit was more than my gross income from my day job for the year.

They can also be bad. I have another apartment that has cost me over 30% of the purchase price in repairs. It has only recently become profitable, and while unprofitable it was unsellable at anything close to a reasonable price. The temporary losses didn't break us, because we were getting income from the other rental.

So, diversify. If you can't afford to diversify, you are taking a huge risk. And few housing markets have had a sustained boom like my city, so huge capital gains are far from guaranteed.

[1] There is no capital gains tax in my country.