Thread: Retirement/Investment Planning

Now your next position may be that you have compounding interest. My reply is that if I were to reinvest my gains in 4 years I could buy another house, and double my income. Then in 2 years I buy another and triple it, so on and so forth.

Your mileage may vary, but there is risk and reward in anything you put your time, money, and heart into.

Originally Posted by CivilWars

There is a huge difference in increase in value, and income. If you had 40K in your 401K, and made 10% per year, assuming you pull put all profits, you would make 4K per year. If I put 40K in a rent house, and make 900/month, assuming I pull out all profits, I make 10,800 per year. Plus, if things go well I see an increase in equity. Who wins?

If you're making $900 a month after taxes, mortgage and repairs, that's amazing.

My friend that is doing it sees about $100-$200 a month per house of profit (minus a large chunk every few months for repairs and appliances) and does most of the repairs and legwork to find tenants himself... which sounds like a pain to me. He is building a TON of equity though.

He also has to pay taxes on that profit.

On the other hand, my Roth 401k is building 10% a year right now of pure untaxed profit and increasing every month.

Of course, the compound argument works in both realms. The difference is the houses compound the work you need to put into them as well.

Much of it also depends on how leveraged you are. One thing that many real estate gurus preach is to leverage your own money by taking out financing on property, but still maintaining a profit. There are pros and cons to this as you can buy a house for 10-20% down, whereas in most cases you need 100% in cash to buy securities, but if the market does turn to shit and you are over-leveraged you can lose your ass. Me personally my goal is to pay cash for something like a 200 unit storage facility. If I can average $100 per month per unit (rent rates are higher, but figuring 100 after taxes, insurance, and vacancies) then I would be grossing 20K per month. Pay someone 5K to run it, and you profit 15K per month. Numbers are VERY rough, but you get the idea.

Originally Posted by QuickLightning

Of course, the compound argument works in both realms. The difference is the houses compound the work you need to put into them as well.

Or you do like you are doing with your 401k, and pay someone else to manage it for you. Works both ways there too.

Originally Posted by CivilWars

Or you do like you are doing with your 401k, and pay someone else to manage it for you. Works both ways there too.

My 401k is managed privately, but they only take something like 3% of the profits or something like that. It's extremely small per individual and honestly I don't even see the subtraction, but i imagine they make an insane profit across the tens of thousands of accounts they manage.

The housing rental companies I heard of in my area seem to cost ~$50 a month.

And here I was thinking that $200k was on the cheap side of things. Lol. Maybe I will get house when I start going for my doctorate.

http://www.deptofnumbers.com/asking-prices/

200K may be median for houses you want to live in, but not to rent out.

Originally Posted by CivilWars

http://www.deptofnumbers.com/asking-prices/

200K may be median for houses you want to live in, but not to rent out.

Yea we buy rental homes in Glendale which is a medium-lower income level area. The same homes that are selling for 40K in Glendale are going for 90K in Peoria which is like 10 miles away.

Check out the homes in Glendale Arizona, average is around 40K.

Homes.com - Real Estate and Homes For Sale.

Originally Posted by CivilWars

Real estate is where the most millionaires in the US either made or keep their money, and in many cases both. If you don't want to do rent houses look at other options. My medium term goal is to buy/build a storage facility. It has all the rewards of rentals, but with a lot fewer headaches.

That's what I've noticed. I've started buying land. I use whole term life insurance to stash away money, max on qualified accounts, and some other things I can't really talk about.