Invest in 401k or go all in on real-estate!

[Sean Moore]

401K? Or All in on Real-estate?

Hello y’all I am 25 recently married and recently my wife and I have been looking over finances. My 401K doesn’t have a match and is costing us 0.79% of funds under management. I am in the lowest cost fund I could find (Vanguard total market fund) and was wondering if I should still be investing in that or turning my attention to more real-estate. I bought a Tri-Plex in 2019 and am currently in the process of doing a 1031 Exchange. Any thoughts on the 401K greatly appreciated😁

[Randall Alan]

Being that you are in real estate, the answer to your question should be pretty obvious.  Your 401k is likely invested in the stock market.  You have historical evidence of the average return of the market…. Most people I know use 7% for that return over time. 

You can run your own numbers on your real estate investments.  We average 25-35% return on our portfolio, and that is before you factor in market appreciation on real estate, which lately is on fire!   So from a financial perspective, real estate definitely comes out on top - but with more effort than a 401k.  If you had a match to your 401k you should definitely take advantage of that though.

There are other questions you have to ask yourself though.  Like what is your level of self control?  Some people need the restrictions that come with a 401k to not spend the money.  

We are at the point where our real estate cash flow exceeds our monthly expenses with about 24 properties.  Your 401k will never do that.  Once you achieve that, your 401k really starts to seem secondary!!   So my vote would be to lean more toward real estate and grow that as much as you can. 

All the best!

Randy