When it comes to retirement savings, you have more options than ever. While a 401(k) is the go-to option for most people, investing in apartment real estate can provide high returns and flexibility that’s hard to compete with.
Here’s why real estate is better than a 401(k).
REAL ESTATE PUTS YOU IN THE DRIVER’S SEAT
A 401(k) gives you some control over your retirement savings, but you still have to navigate the mountain of bureaucracy and restrictions, such as:
Annual contribution limits
Penalties for withdrawing your money before retirement
A select choice of investments managed by someone else
Investing in real estate puts you in the driver’s seat. You’re in control of every decision. If you want to find new ways to cut costs, renovate the property to raise rent prices or find better tenants, you have the power to do so.
Having greater control over your investment also means having greater responsibility, but there’s nothing stopping you from educating yourself and ensuring that you do your due diligence with each investment.
THERE ARE TAX ADVANTAGES TO OWNING REAL ESTATE
Multi-family real estate investments offer tax advantages that are often overlooked. Yes, property taxes can feel like a burden, but having rental properties allows you to take advantage of depreciation losses. This deduction allows you to write off the home’s cost over a period of time – 27.5 years.
In reality, real estate rarely depreciates in value, so this deduction allows you to reduce your tax burden and offset expenses without experiencing any perceived loss.
LEVERAGE OTHER PEOPLE’S MONEY
Investing in a 401(k) requires you to contribute your own money to your account. With apartment real estate, it’s entirely possible to make investments while holding onto your hard-earned money.
Conventional loans and private lenders can fund your investments, with you putting very little or no money down.
Leveraging other people’s money means that you have less of your own money tied up in deals and projects. This means that you can potentially take on more than one deal at a time to accelerate your retirement savings.
WITH REAL ESTATE, YOU CAN SKIP THE FEES
Did you know that 401(k) investments come with fees that can eat away at your retirement savings over time? Unfortunately, many investors don’t realize that they are even paying fees. These fees aren’t hidden – they are disclosed in the prospectus you receive when you enroll – but many investors don’t pay attention to them.
Every month, your 401(k) provider takes a fee. This fee can range anywhere from 0.5% to 2%, depending on the size of your plan, the provider and the number of participants.
When you invest in real estate, you can skip the fees. Unless your properties depreciate in value, which is uncommon with multi-family properties, your investment will only grow.
Investing in multi-family real estate is better than a 401(k). You’re in control of your investments, you can enjoy tax advantages, and you can leverage other people’s money to purchase properties.