Diversification is essential since real estate can be just as volatile as stocks and other assets. Remember the housing bust when the market peaked in 2006 and declined for years?
In my book The Cul-de-Sac Syndrome I wrote about a southwest Florida couple who loaded up on real estate at the height of the housing boom more than eight years ago in hopes of quickly “flipping” the properties and making easy profits.
When the bust came, they got nailed and were stuck in a situation where they had to sell the properties, but couldn’t find any buyers. At the same time, they were clobbered with higher property tax and insurance bills on the homes they owned, which ate up all of their cash and nearly bankrupted them.
via Managing Real Estate Assets in Your Retirement Portfolio.