Tangible Assets

[Broken Arrow]

Originally Posted by sweeps

Real estate is a different matter. You incur a cost to buy it, you incur a cost to sell it, and you incur a cost to hold it (insurance, taxes, maintenance and upkeep, etc.). These costs can be substantial.

This is an extremely important point when considering real estate as an investment! I didn't mention it here, but have in the past as something to be aware of. When you think about it, taxes, insurance, and homeowner's fees amount to quite a large expense ratio. And if you hold a mortgage, you're also sort of trading on margin. And if that isn't bad enough, this is hardly the time to get into the housing market IMO....

Granted, the story is different when the property also doubles as your primary residence (such as living there yourself while renting spare rooms out). In that case, it may be worthwhile, but not everyone is in that situation or can consider that as an option.

[checkthebudget]

Excellent thoughts sweeps. The differences in expenses are quite significant. With real-estate, we often just think of the buying price and selling price and not all the expenses that will be incurred along the way. The index fund would certainly be a lot less hassle wouldn't it.

[checkthebudget]

Just found this fascinating article about 401k vs Rental property. It give some interesting things to think about in the comparison: Will you ever put a penny in your 401k again? « How to Make 7 Million in 7 Yearsâ„¢

[noppenbd]

Originally Posted by checkthebudget

Just found this fascinating article about 401k vs Rental property. It give some interesting things to think about in the comparison: Will you ever put a penny in your 401k again? « How to Make 7 Million in 7 Yearsâ„¢

Very interesting post. I read the article and checked some of the math, which seems to look actually very good. Anyone with experience in rental properties that can vouch for the assumptions made? The poster assumed 5% rental rate (I think that is 5% of the value of the property=yearly rent). He also assumed 25% of the rent goes to expenses (aside from mortgage), is this reasonable?

[ea1776]

What are the funds offered in your 401(k) ?

Stocks are the best long-term investment. Try a solid mutual fund with a low expense ratio, or an index fund, like S&P 500 index fund.

Good luck!