Should I Invest In Real Estate Vs. 401K: How To Actually Compare

Benefits Of Maxing Out 401K Vs. Rental Property Reduced Taxable Income Besides housing, taxes are the most significant expense for an average household. Tax planning strategies should always be at the forefront of any decisions you make.

Tax-Deferred Growth The contributions in your 401(k) grow in a tax-deferred manner. The earnings on your 401(k) are not taxed till you withdraw.

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Lower Tax Rate Withdrawal

Both the contributions and earnings are taxed only when you withdraw. You can plan the withdrawal to occur when your income is low such as during retirement. As a result, you can pay lower taxes.

Advantages Of Investing In Rental Property Vs. 401K

Leverage The best advantage of real estate investment is the use of leverage. When you buy real estate with a down payment and a fixed-rate mortgage, you are using leverage.

Investment Control When you buy a rental property as an investment; YOU are directly responsible for the investment returns. Rental property investment returns depend on your skills to find a great deal, negotiate a deal.

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Passive Income

Rental properties provide a steady cash flow as a passive income stream. The cash flow is calculated after all maintenance and capital expenses.

Appreciation

In addition to your monthly cash flow, the rental property also appreciates. San Francisco, which is one of the best places for technology jobs, has seen a massive price appreciation. Even if you are not in tier-1 cities, the rental property typically appreciates at an annual rate of 2%.

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