Cashing out stocks to fund RE journey

[Anthony Espinal]

I’ve been fortunate and blessed to have been employed by a company who has employee stock options over the last 10+ years. Admittedly, I had no idea what I was doing, set my “contribution” to 10% and never thought about it. Right now I’m looking at a large sum that I can’t help to think would be better served in the RE market.

Would cashing out be a good idea? It’s a big chunk of change that I’d be able to use to buy several properties. I also have a smaller amount in a 401k. Would a loan against the 401k be a better idea?

[James Mc Ree]

Compare your expected returns for your stock/option savings to what you might get in real estate.  That is the financial side, but only the math portion.  Keep in mind that real estate is not a liquid investment.  You can liquidate your stock holdings in 2 days.  Real estate liquidation is usually a minimum of 3 months, often longer, if you aren't giving it away.

You need to decide on what type of real estate you want to invest into and your role.  Types include residential, commercial, etc.  Your role could be passive in which you hire a property manager to do all of the landlord work or active in which you are the landlord managing your real estate "hands on."  Those decisions lead you to decide what you are comfortable with, need to learn and your timeline.  You can then decide if real estate is right for you.

Take full advantage of your 401k match if you have one.  Interest paid on your 401k loan is often paid back to either you or your plan.  Interest paid to your account is best.  Check with your plan sponsor on terms.  You may be able to withdraw up to $50k for 5 years, subject to your plan sponsor.