When Naseema McElroy was 25 years old, she owned five rental properties. That’s how she planned to build her wealth.
Taking advantage of the subprime lending practice that made it easy for borrowers with weak credit histories to get high-interest mortgages in the early 2000s, McElroy borrowed as much as she could to buy multiple properties, thinking everything would work out in the end, she told CNBC Make It.
About a year later, in 2008, the housing market crashed.
“I was really naive,” McElroy says. Suddenly, she owed the lender more than the value of her property. To avoid foreclosure, she says she was forced to sell two of her investment properties for less than their mortgage balance. Two other properties were also foreclosed on, she says, and she ultimately had to declare bankruptcy.
Since then, the now 44-year-old labor and delivery nurse’s net worth has grown to more than $1 million, according to documents seen by CNBC Make It. Although she owns a home office, the majority of her wealth comes from stock market investments through broad index funds, documents show.
The biggest lesson he learned from this experience was that while real estate is a form of investment, it is not the only form of investment.
Don’t underestimate the amount of work required
Alex Caswell, a certified financial planner and founder of Wealth Script Advisors in San Francisco, Calif., says that while real estate investing has its positives, it can be significantly riskier than investing in the stock market and require more effort than many investors expect.
On social media, “there’s this idea that real estate is some kind of magic bullet for building wealth,” Caswell said. But in reality, he says, being a successful real estate investor requires extensive research and dedication.
Before purchasing a property, Caswell says investors need to consider a number of variables, including how much the property will appreciate in value, property taxes, maintenance and insurance costs, and how best to finance the purchase.
All of these variables are dependent on assumptions, and all of them can add up to a “more unpredictable investment experience,” Caswell says.
Being a landlord can be difficult
Plus, becoming a landlord like McElroy may not be as easy as collecting a monthly check, Caswell said.
“I just remember how difficult it was to be a landlord,” said McElroy, who was working full time as a medical administrator at the time.
In addition to the constant costs associated with maintaining a home, she says collecting rent and serving tenants has always been difficult.
McElroy said she didn’t make as much money from the business as she expected, and in retrospect, not understanding the true costs associated with real estate before taking on too much debt was the biggest money-related mistake she ever made.
Let’s save up for retirement first
If you don’t plan on becoming a full-time real estate investor, Caswell says you’re better off investing in the stock market through a retirement account or traditional brokerage account and prioritizing financial security.
If you want to “dabble” in buying real estate, do so only after you’ve saved enough to retire comfortably, he says.
“The risk and level of dedication required to succeed in a real estate venture is enormous, and failure can be financially devastating,” Caswell says.
Want to lead with confidence and bring out the best in your team? Take CNBC’s new online course, How to Become an Exceptional Leader. Expert instructors share practical strategies to help you build trust, communicate clearly, and motivate others to do their best work. Sign up now and use coupon code EARLYBIRD to receive an initial discount of 25% off the regular course price of $127 (plus tax). Offer valid from March 16th to March 30th, 2026. Terms and conditions apply.
