Why would asset diversity be considered prudent rather than being an incompetent means to chase mediocre returns? It's not necessarily high leverage, since you

Why would asset diversity be considered prudent rather than being an incompetent means to chase mediocre returns? It's not necessarily high leverage, since you don't know anything about the person's balance sheet. It matters a lot more how much (and what type of) debt the person has, not so much how much debt the real-estate has. Their monthly debt payment to income ratio may be low for example, such that the mortgage isn't a problem at all (and it's an inexpensive way to borrow while inflation is high and mortgage rates are well below that rate of inflation, which is a historical oddity for the US). Diversification-as-mantra is for people that don't know what they're doing and don't know where to focus. This is what morons on television preach, and other pop investment experts, because they too have no idea what they're doing, they just know that spewing out "diversify" won't get them fired and it seems safe (mediocre returns are anything but safe). The typical person is incapable of being an expert at many asset categories. It is possible, over time, to become an expert at one or a few however, including real-estate. If you acquire competency at real-estate investing, it will pay off handsomely over time (as with equity investing). Unless you're born wealthy or acquire a lot of money in some other way, you're going to start off buying one property. Certainly one can reasonably debate the amount of down-payment to start with on that first property, depending on personal finances. The most prudent investment path is to focus on an area narrowly, concentrate at becoming good at a thing, develop as much skill at something as possible. That competency is your safety, not diversification (which is primarily useful when you have little to no skill and need to spread your investments around widely because you don't know what to focus on to generate superior returns for yourself; this is why someone like Warren Buffett advises the average person to just buy a low cost index fund, it's because they're incompetent investors ill suited to managing anything on their own - they simply do not have the skill to do so - and the index fund provides relatively safe generic diversification in the stock market, and the matching returns for that as well).