All Forum Posts by: Kevin S.

 Thanks Zach.  The goal is obviously both if possible, cash flow and wealth preservation.  Growth too if possible.  If someone take RMD on 1M from 401k he/she would get about $80,000 for 26 yrs after which it is zero.  If he cash out 401k(@ 60 y.o), pay tax and buy RE with remaining cash, he/she will get less, about $45,000/yr (assuming 6.5% cap rate).  After about 10-12 yrs the cash flow will be about $70,000/yr (5% increase in rent annually). Needless to say it increases every year in perpetuity besides the appreciation and other tax benefits.  Now, of course I don't know if this hypothetical scenario is true which is why I am here seeking comments from those who have done it or failed at it.  Thanks all.

Thanks for the advice, Rob.  Good to hear from someone who actually did BOTH for a LONG time.  Would your opinion change if all the RE was handled by professional PM company?  This will remove all the factors you mentioned such as managing, keeping with the landlord laws etc?   Thanks.  

 I agree and thanks for your comment.  The original question was : Do a person buy all cash (1M) RE or leverage his 1M for a larger 4x RE with either one 6.5% cap rate.  Secondary to that question is the claim (by someone) : One become poorer with time as he draws from his retirement account every year vs getting richer with time if he hold retirement wealth in RE. 

 Agreed. And agree that person had accumulated both apples and orangutans all his life.  He has both in his basket and now need to make a decision.  Let's assume the person is willing to do 'whatever' needs to be done for 'maximum' returns with the focus on the words whatever and maximum for either scenario.  Mind you whatever doesn't means him physically renovating the properties but making deals, dealing with contractors and property managers, CPAs, attorneys, etc.  Yes, you got all your match in 401k, tax deferred benefit, passivity and you are now near retirement.  Is there truth in the claim that having retirement (taxed and tax deferred) account for retirement means you get poorer every year as you draw funds to live on vs get richer with RE every year with rent, mortgage pay down, appreciation and tax benefits?  People say it's 'diversity' and I agree fully.  But the purpose of my question is only to find out if there is truth to the claim.  That simple.  Thanks for your input Mike.

 Assume cap rate is 6.5% for 1M or 4M property, assuming person retiring from work as the work 'retire' means(not working) and his age is 65.  With all assumption cleared what is your thought on 1M with cash or 4x leveraged(1M down)?

 Have fun. And not loose too much in the process!  Thanks for your input.

 Thanks Mike.  Someone once said that keeping money in retirement account (401k or otherwise) will cause you to be poorer every year as you live on it and withdraw $$ from your account every year.  Where as putting it to work in RE will result you being richer every year.  Wanted to put it out there and hear from RE investors who are walking the walk.

 Thanks Benjamin.  You are saying it's better to buy the place outright vs putting that money as a down for a property 4x larger value?   

Chris. I don't mean literally one property or one stock.  It's a hypothetical question for $1,000,000.00 with no reference that it is the only  $1,000,000.000 on hand.  I did reference SP 500 tho but I get your point. Question was assuming both properties (1M and 4M) has a 6.5% cap rate.  First one, buy cash $1,000,000.00 and second one with 1M down and 3M loan.  Person in question is near retirement which probably changes the equation vs someone in their 30s. Thanks.   

Thanks Dan.