[KingMachiavelli]

That's just not the case even though the net cash flow makes it seem like landlords are often just breaking even.

If a tenants rent only covered the the monthly mortgage, that's still a 5.5% ROI assuming 20% down, 30 year mortgage. Accounting for interest rates, then the ROI is 5.5-(R*0.8)% returns.

But rents go up yearly to match market rents so the actual returns are closer to 15-22% (though it tends to scale poorly which is why REITs pay so little IMO). Even after accounting for loan interest & costs, real estate is a very attractive 8%-15% investment with very favorable tax incentives. E.g. gains gan be deferred as long as they are invested in other real estate, positive cash flow is typically tax free due to depreciation of property - despite it's market value going up!.

[WalterBright]

Once you sell, though, that depreciated value becomes your cost basis for capital gains, and then you get socko'ed with taxes.

[KingMachiavelli]

IRC Section 1031 lets you transfer the cost basis as long as you reinvest in real estate and inherited assets get stepped up cost basis. As long as you stay invested in real estate (and the tax laws don't change), you could get an entire lifetime of appreciation tax free all while having positive cash flow.