It's fine to have some of your wealth in relatively illiquid assets if it produces sufficiently high positive cashflow. For example, we lease out our previous home, and the rent we're paid (after subtracting the 6% we pay the property management company) is more than 80% higher than our mortgage payment.

If we sold the property, and invested what would be left over after paying closing costs and paying off the mortgage, we'd get less per year than what we get now. Plus, the current setup lets us deduct depreciation from our taxes.

Another important thing is that the equity in that property is a small fraction of our net worth, not like your friend's case where nearly all her net worth is tied up in illiquid investments that may not contribute much to her cashflow.