I've owned quite a few rental properties over the years and they certainly aren't without issues and headaches, but I wouldn't liquidate or even partially liquidate a 401k account to buy them. As said, the tax and penalty doesn't make it worth it and you'll find that that 401k eventually rolled over into an IRA will give you tons of investment options.

N.B.: I'm not a gamblin' man. Not with our retirement investment.

There's not a chance in hell I'd have cashed-out my 401k to buy rental property. For starters: I've known several people throughout my years that were landlords and every last one of them told me it was a roaring pain in the ass.

I figure life is challenging enough without going looking for new, additional challenges

Then there's the penalties that'll take a big bite out of it for early withdrawal.

A year before I retired we took the majority of my modest 401k and moved it over to an investment account with a well-known investment firm, our account being run by a guy who came highly-recommended. It's mostly very conservatively invested.

In the nearly eight years I've been retired: Between SS and a monthly disbursement from that account we have actually more "take-home" than I had when I was employed and the account balance is still usually higher than when we put the money in there.

Plus we paid off our home and two relatively new cars, and have little CC debt.

We went top-drawer with Medicare + Medicare supplemental insurance, so we don't get medical surprises.

We scrimped and saved to get where we are, mostly due to my wife's wise efforts, and we're now enjoying the benefits of having done so.

It's called having "low time preferance" or "a long time horizon": Willingness to forgo immediate gratification for later increased reward.

hell no.. you are crushing it why screw it up. I hear so many horror landlord stories.

If anything save some money separate to invest in the real estate. Leave the compounding interest alone

You never cash out a 401k until retirement. The penalty is too high.

Just in case 95% of the crew hasn't stated it clearly enough.
Hell no.

Good job on the $1.2M by 41. You're well on your way to early retirement.

More renting is going on now then ever before it's going nuts.

The great news is rents are above average. The better news is occupancy is up also.


But there are a half dozen angles to consider.

Rentals can be a headache at times, but what isn’t ? Anything worth having is not going to be easy.

I provide my tenants top notch service and interact with them at least once a month. Preferably in person. It works for me and I have far more good than bad.

If your opposed to fixing a few thing and can’t afford vacancy landlording is not for you.

I like an investment I can walk around on, that’s insured and I have control over.

If you don’t mind sharing, what did the path to $1.2 million in a 401k look like at age 41? I’m into saving and investing and think there could be a lesson to be learned here, lol.

Has everyone's 401k kept up with inflation over the last few years?

$1600 a month rent sounds pretty cheap for new construction. It would take you 10 years just to break even. Now you need to add in the early withdrawal taxes/fees and all the other expenses listed above and you are just adding more time to the break even point. Not to mention most new construction is built like shit and you will probably be replacing many essential items sooner than you think.

If that 400k earns 6% in the 401k in 20 years it would be 1.2 million

In a local town with a great school district someone built a street with about 50 townhouses with 3 bds and 2 car garages. They are going for $2500 a month and they are taking section 8. There are a crap load of people on probation and parole who moved in.

quote:

Originally posted by Jupiter:
Has everyone's 401k kept up with inflation over the last few years?

Ups and down with market volatility, but averaging 10-20 percent depending which 5 year look back you use.

Another consideration that hasn’t been mentioned. Assuming you’re the hands on landlord, your energy level at 41 yo will be very different when you’re 50 and 60. Long days and late night emergency repairs won’t be fun.

With that kind of 401k balance, let it ride and enjoy your free time.

quote:

Originally posted by Russ59:
Another consideration that hasn’t been mentioned. Assuming you’re the hands on landlord, your energy level at 41 yo will be very different when you’re 50 and 60. Long days and late night emergency repairs won’t be fun.

I would agree with that. A couple of years ago I rewired, replumbed, and demoed the kitchen for a remodel in our KC MO property. Half of the plumbing and wiring was in a crawl space instead of a basement. I paid the price for 3 weeks afterward. I am 69 now and still walk 18 holes at least once a week. I don't think my body could take that now. On a happier note I did save us a TON of money.