Invest in 401k/Stocks or go ALL IN on real estate???

Question

Am I stupid to consider pausing my stocks/401k (my company does NOT match) investing and throw that extra capital at real estate?

Right now I can get to 10x OOS TK (SFH) properties in 5 years while investing in stocks/401k, but if I invest primarily in real estate I can get to that goal in 3.5 years

Ideally, once I get to 10x OOS TK (SFH) properties I would throw all my money I would have saved for real estate at stocks/401k OR consider going for more ambitious real estate goals.

...thoughts?***My numbers are based off a cashflow of $250 per property after deducting maintenance (5%), capex (5%), vacancy (5%), and PM (10%)***

George Blower · Answer

@Mikhailangelo L.

@Sergio B.

@Mike Miller

Keep in mind that in order to take a distribution under the CARES Act you must have been impacted by the virus in one of the enumerated ways & your current account provider must allow you to take a CARES Act distribution. The IRS recently provided guidance regarding eligibility under the CARES Act and specified that a qualified individual includes an individual who has a reduction in pay (or self-employment income) due to COVID-19.Distributions:

If so, you can take a penalty-free distribution (as well as waive the 20% withholding requirement) from your 401k (assuming that the employer allows it) anytime between 1/1/2020 and 12/31/2020. You may avoid the taxes if you deposit the funds in an eligible retirement plan (which includes anIRA) within "3 years and a day" of the date of the COVID-19 distribution (note: compare to a 60-day rollover). Please note that the account into which the funds are deposited must be the same type of account from which the funds were first withdrawn (e.g. withdrawal of pre-tax funds from a 401k could be deposited in a pre-tax IRA but not a Roth IRA - "like to like").

Patrick Britton · Answer

@Mikhailangelo L. anybody telling you that you should do ALL this or ALL that is giving you some pretty lousy advice. This is an REI forum and guess what the traders on another forum have to say about real estate? That it's junk!

It's not about investing in this OR that. It's about doing what you're comfortable with. Risk and reward go hand in hand, don't let anyone tell you differently. And keep in mind, like most things, luck plays a big role in REI. In fact, it's much bigger than anyone with a small ego can admit.

Want a simple answer, do both.  At least for a while and go from there.

Sergio B. · Answer

I am still debating if to take 100k out of my 401k . The window of not paying the penalty closes in December....the clock is ticking.

Mike Miller · Answer

I am looking into the CARES rules regarding the 401k/IRA withdrawal rules without penalty.  It looks like if you were financially affected by COVID you can pull out $100k from a 401k or IRA without the penalty and can split the tax bill over 3 years.  In addition, if you get the money back into the account within 3 years they will give you back the taxes already paid.

They also made some rule changes regarding the 401k loans.  The $50k limit is still in effect, but payments can be deferred by 1 year.

Joe Villeneuve · Answer

Yes,...and no.  Yes, with all my freed up cash.  No, with the retirement funds my wife gets from her work...because her employer will match.  Not going to lose the free money.

Joe Villeneuve · Answer

REI all the way.  The SM can't keep up...at any time.

Jon Crosby · Answer

I always say if a company doesn't match, then move to something better.  You could always redirect into a Self Directed IRA and get the best of both worlds by keeping some of it in robo-brokerage account and then invest in RE with the rest.  I currently have a brokerage account, multi-family RE, crypto, precious metals and a few others in my self-directed.  Self-directed are not for the faint of heart however, you are basically on your own in them so you need to make sure you play by the rules and find a good custodian to work with.

Best of luck!

Ben Zimmerman · Answer

@Mikhailangelo L.  Have you bought OOS TK properties before?  Do you have a reputable company that you have made multiple purchases with or PM company that you use and trust explicitly?

If the answer is no, then don't jump head first into something that you have never done.  Just look around the forums at all of the people that have been burned by OOS investing.  OOS investing can be risky, regardless of what people tell you.  Buying a B class property for 100k because your TK company said it was a fantastic deal can turn ugly real fast when the reality is that its a C- property that is only worth at best 90k after a few repairs.

However if your company isn't matching, then you probably shouldn't be doing a 401k either.  Do a Roth IRA, backdoor IRA, or mega backdoor Roth IRA.

Bud Gaffney · Answer

@Mikhailangelo L. All in on REI! 😃

Tyler Ryan · Answer

All in REI, especially if there is no match

Invest in 401k/Stocks or go ALL IN on real estate???

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