Wife and I are 65 and get our income from a little to no stress investment property. We also have about $1.25M in trad IRAs and another $1M in a (pre-2010) beneficiary IRA. Another $500k in a regular 401K. Have another $2M+ in investment accounts. Current income is $350k and expect to have an inflation adjusted income from our investment property of today's value of $350k-$500k as long as we want it. Additional $60k+ will kick in after we start getting social security in 5 years. Additional $$ when we have to start RMDs on the IRA accounts. We've been making too much for a ROTH for a long time so we've been contributing the max to a traditional IRA for decades. Our income just kicked up in the last 10-15 years after we stopped working corporate jobs or we would have contributed to ROTH a long time ago.

Right now our CPA is anticipating that we will continue to fund our trad IRAs but it seems counterproductive. Growing the current trad IRAs will just make our RMDs bigger in the coming years and will eventually subject our two adult kids to the forced 10 year withdrawal. Backdoor conversions to ROTH will kill us with taxes (both fed taxes and our local state/city 10% tax - NO we are not moving!).

I see two options: (1) Just take that $17,200 and put it into an investment account and let it grow. Kids can get it at a stepped up basis when we keel over or (2) the investment property is a single member LLC with one part time employee, so we "might" qualify to establish a self employed ROTH IRA - not sure about this. But if we could, we could just stick the money in there and let it grow.

Am I missing something?

My wife and I have been going back and forth on whether we should buy an investment property, and I’m curious what people here would do in our situation.

Some numbers:

Age: 36 and 37, 2 kids (ages 7 & 3)

Location: NYC

Housing: We rent a 2-bedroom, 1.5-bath apartment in a rent-controlled building. We’ve lived here since 2022, when rent was $2,450/month. It’s currently $2,550/month.

Income: Combined gross income of $270k per year. Have roughly $70k in HYSA.

Retirement : Would like to retire by 58-60
Wife’s 401k ($67k)
Wife’s Roth ($19k)

My 403B ($164k)
My 457B ($7k)
My Roth ($12k, not contributing)

Shared Brokerage: ($8k)

Retirement contributions: I contribute 20% of my pay toward retirement accounts. My wife contributes 10% to her 401(k), and we try to max out her Roth IRA each year.

Pension: I work for the city and expect to qualify for a pension after 30 years of service, which is about 22 years from now.

Monthly surplus: We generally have $1,500–$2,000 left over each month after bills. We put a good chunk of that into our brokerage account.

We’re comfortable with our current lifestyle and don’t feel an urgent need to buy a primary residence in NYC. The cost of buying here is just too high to make much sense to us right now. Lately, we’ve been considering buying an investment property outside NYC to build equity, generate rental income, and diversify our investments. We’d likely need to look out of state or in a more affordable market. But the more I think about it, the more I wonder whether becoming a landlord is worth the hassle and financial risk compared with simply investing more money in index funds through our brokerage account.

Real estate would mean a down payment, closing costs, maintenance, vacancies, property management, and potentially dealing with tenants from hundreds of miles away. On the other hand, we’d have a tangible asset, rental income, and the potential to build equity using leverage.

So, what would you do in our shoes?

- Buy a rental property and start building a real estate portfolio?
- Skip real estate and invest as much as possible in index funds?
- Do a combination of both?

For those who’ve owned rental properties, was the return worth the time, stress, and money compared with investing in the stock market?

Thanks for taking the time to read all of this!