In my state if you have a $500,000 dollar house... your taxes will be about 5000. Your insurance will be close to 4500. And you have no guarantee that you'll make 10%. And it's 100% taxable (unlike other investment opportunities) And you haven't made the 10% until you sell the property. You've made it on paper, and as I said... if you're talking about rental property that you can dump whenever you need to, that's one thing. If you're talking about your primary residence it makes it's another.
But beyond that..... if you're buying a piece of property for 500k to use as rental property... then you've got a screw loose. So you buy 4 or 5 pieces of property that equate to that dollar value. That means you've got to keep 4 or 5 renters that all pay on time, and don't tear the house up etc. You can make money doing it... but it's not investing. It's called running a business.
Are you really that unable to understand a simple example? You took a generic example and shot it down. The example is an equation. I did the same gain with stock as the sRE investment to show you LEVERAGE. You can plug in any number. 500,000 was an EXAMPLE.
If you're in a state where you don't make any money on RE, then you're right, you don't have an investment, you have a house. BTW the law in the US allows citizens of one state to invest in other states. That's how you make money.