Why I am not sorry I skipped my 401k to invest in real estate

Almost 3 years ago I left a my career in management to start a career in real estate.  I wanted to replace my income by being a real estate agent and free up time to focus on RE Investing.  My motivation for that could fill an entire post but leaving a good job and quickly advancing career for real estate was a gamble.  It took about 24 months to fully replace my W2 income with real estate sales income but during that time and up to now I have been consistently investing in real estate through the BRRRR method.

One thing I have felt guilty about at times since leaving the W2 world is that I have not consistently contributed to a 401k or IRA like I did for all of my W2 years.  That is one thing I never see talked about by RE Investors or on BP.  What did you give up to invest in real estate?  Every paycheck since I was 23 I paid into my 401k.  I consistently contributed 10-20% of my income to my 401k and was really starting to see the balance climb about the time I quit my job at 30.  I know the power of compounding interest and was wondering if my chase for financial freedom through real estate was hurting my retirement goals long term so I decided to dig into the numbers.

Lucky enough the amount in my 401k when I quit my job and the amount of cash I had created through a few live in flips were almost identical which helped me see pretty clearly which strategy was working better for me but I dug deeper to get exact returns.  I used the cash I had built up to begin investing in rentals with the BRRRR strategy.  After checking the annual stock market returns from the date I quit my job to now & plugging them into a bankrate.com calculator along with the amount I would have contributed to my 401k over the last 3 years and comparing that to the amount of equity that I now have in my rental properties I found the following:

Every $1 I would have contributed to a 401k in the last 3 years would now be worth $1.67.  Not bad at all.  A decent stock market return over 3 years + the 401k match & the magic of compounding interest make for a solid 3 year return. It's low hassle and over time it really will make you wealthy.

On the other hand, real estate is far from low hassle but every $1 I put in over the last three years is now a whopping $3.44 in equity!  So the returns in equity created alone are double what my 401k would have done!  In addition to creating massive equity through the BRRRR strategy real estate has afforded me tax benefits & monthly cash flow.  I've got to tell you, I no longer feel guilty about pausing my 401k contributions.  Have you run the numbers on how your RE investments are performing in comparison to the other things you could be doing with that money?  If not, it's worth the time and I hope that you find a surprise success story as well!

Side Note:  I did still fund some IRA's over the last few years so I did not completely stop investing in the stock market but my contributions were significantly reduced.  I also put more cash into real estate as I could and probably invested at least as much additional money into RE as I would have put into the stock market over the same time period.  My passion for real estate investing pushed me to make sacrifices and maximize my investments which meant not only did I make money on the initial money i started with but I kept investing aggressively.  

Side Note II: It was my strategy to jump in and put all my eggs in the real estate basket over a short term.  Now that I have built up my investment portfolio I will continue to re-invest my real estate earnings and watch that grow but also return to funding my retirement accounts.  I think it is ok to be heavily invested in one thing for a short period but over the long haul I do want some diversity and will continue to contribute money to my retirement accounts to achieve that goal.