My Brother Bought 3 Rental Properties With Our Inheritance And I Used Mine To Pay Off Debt. He Says, ‘That's Why I'll Retire Rich And You Won't’

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An inheritance can make two people equally wealthy on paper and still leave them with very different ideas about what to do next.

Two brothers each received $400,000 and took their money in opposite directions — one toward rental properties , the other toward getting out of debt. Before long, one brother was already predicting which of them would have the richer retirement.

"That's why I'll retire rich and you won't," he told his brother.

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He Turned $360,000 Into Three Rental Properties

The brother betting on real estate used $360,000 of his inheritance to buy three smaller two-bedroom condos in a Florida town for $120,000 each.

He paid cash for all three, leaving $40,000 from the inheritance as a reserve.

His plan was to rent each condo for about $1,550 a month. If all three stayed occupied, that would bring in $4,650 a month, or $55,800 a year in gross rental income.

And because there are no mortgages on the properties, he wouldn't have monthly loan payments eating into those rent checks.

That's the part of the strategy that's easy to like.

The less glamorous part is everything that comes after the purchase.

The $55,800 is gross income, not money that goes straight into his retirement account.

The condos will come with property taxes, insurance, HOA or condo association fees, maintenance and repairs. There can also be vacancies, tenant turnover and unexpected costs — including a potentially expensive special assessment from a condo association.

Florida insurance is another expense he'll need to account for. Paying cash gives him more flexibility than a financed investor would have, but going without appropriate coverage would leave a significant amount of property exposed to a major loss.

The properties could appreciate, too, potentially giving him another source of wealth down the road. But appreciation isn't guaranteed, and three rental properties also mean three properties that need to be managed.

His $40,000 reserve could help absorb some of those surprises.

The other brother took a much less complicated route.

He had about $147,000 in debt: a $40,000 mortgage, $50,000 in student loans, a $30,000 truck loan, a $12,000 car loan for his wife and $15,000 in credit-card debt.