Invest on real state vs other option

Never have business partners. IMO dump it and take your money.

So this is a pretty straightforward IRR problem with some unknown variables.

You have an asset that you can sell for 35K (forget what you paid for it - that's a sunk cost. You claim that you could invest it for 10% elsewhere - presumably with a similar level of risk as the rent house.

So that 10% would be your required rate of return. You would compare that to the rate of return on the house based on the cash flows.

I can already tell you that you won't get a 10% rate of return on the house, since the rent alone is only giving you a 5.3% return (4.5 / 85) and you haven't even considered the interest expense on the loan or other expenses like maintenance/taxes/insurance. If you're paying 3-4% on interest you might be lucky to break even. Yes, you'll have an asset that's appreciating in value, but unless that appreciation is 20% or so annually it wont get you to 10%.

But, for the sake of argument, you would take all of the cash flows in each year (initial 65K outlay, rent income, interest and other expenses, and sale value of the house after 20 years), plug them into excel or a financial calculator, and calculate the "IRR". If the IRR is less than the 10% you can earn on other investments of similar risk, then it's not as good of an investment.