Quora Answer: Why Do Rich People Not Just Buy 10 to 20 Houses & Live off the Rental Income?

The following is my answer to a Quora question: “Why do rich people not just buy 10 to 20 houses, and live off the rental income?”

Unless you are specifically in the real estate or property management business, this is not the most efficient way to generate revenue and accumulate wealth.  Houses are not liquid investments, and there is substantial risk due to non-diversification.

Property is subject to tax, and there is maintenance costs.  This eats up a substantial portion of revenue.  The houses are subject to the rental market, and there are no guarantees you get tenants, let alone good tenants.  This creates a lot of inherent risk.  When the rental, or property market is affected by economic conditions, your entire business portfolio is affected.  For that sort of money, diversifying into funds and instruments has a lower risk, greater liquidity, and lower entry costs.