Investors are always looking for ways to strengthen their investment portfolios, whether by diversifying into new investment vehicles or fortifying their current holdings. The overarching aim of investing is to bolster the financial reserves earmarked for the future.
While 401(k)s have traditionally served as a tax-advantaged retirement savings option, some investors may find that relying solely on these accounts may not generate the necessary funds to align with their long-term investment objectives.
For those investors, real estate might be an enticing investment option for various reasons. But what makes real estate a potential match for investors, and why should they care? In this article, I will explore investing in real estate vs 401(k)s to help you better understand which matches your investment goals more closely.
Investing in Real Estate vs a 401(k)
Both real estate and 401(k)s are investment options with advantages and disadvantages. That’s why when comparing investing in real estate vs a 401(k), it’s important to remember that it’s not a matter of which one is universally “better”. Instead, it will depend on the investor’s risk tolerance, financial goals, market conditions, and circumstances.
When considering the choice between investing in real estate vs 401(k) accounts, it’s crucial to recognize that both options offer distinct advantages and have inherent risks. In the investment world, no guarantees exist, and the allure of one option over the other can vary. Therefore, seeking guidance from a qualified financial advisor before deciding is advisable.
Investing in Real Estate
Real estate is an investment avenue that entails acquiring and renting properties to tenants. This generates rental income and increases the property’s value through appreciation. Real estate investing takes many forms, each with unique strategies and goals.
The most common real estate investing avenues include multifamily, single-family, and commercial properties, all with benefits and advantages. Regardless of the type of real estate investment, investors can expect to take on an increased level of responsibility compared to other investment options, such as 401(k)s. Real estate investing requires careful research, due diligence, and a solid understanding of market conditions, financing options, property management, and risk management.
Using a 401(k)
A 401(k) is a fundamentally different type of investment than real estate because it involves using a dedicated retirement savings account instead of actively controlling an asset.
401(k)s are tax-advantaged retirement savings accounts, named after section 401(k) of the Internal Revenue Code. Employers usually establish 401(k)s on behalf of employees. They take employee contributions, which employers sometimes match, and deposit the funds into an account that a bank or brokerage oversees.
These banks and brokerages invest the money contributed into the account into assets such as stocks, bonds, mutual funds, and ETFs on behalf of the account holder to increase the account’s value. While 401(k)s can be great for investors wanting to be as hands-off as possible, the tradeoff is that they need more input over how investments are made with their contributions. However, there are ways for some investors to take the reins of funds in a 401(k), such as investing it in real estate, if the account is a particular type of 401(k) account known as a self-directed 401(k).
If you’re an investor having difficulty deciding between investing in real estate vs a 401(k) or an investor who is excited by the potential benefits of investing in real estate but may be deterred by some of the caveats, Canyon View Capital may be able to help.
Canyon View Capital Offers Real Estate Investment Options
Investing in real estate vs 401(k): which is better? Ultimately, the answer to that question depends on the investor. However, for investors who find that real estate aligns with their investor goals, Canyon View Capital provides real estate products designed to offer investors many of the same benefits of investing in real estate without the hassle of property management. Also, investors with a self-directed 401(k) may utilize funds from their account to invest with us.
Our real estate products are driven by a conservative approach to investing, underlined by our “buy-and-hold” strategy that targets stable returns from multifamily properties in less volatile markets. At CVC, we’ve used this ethos to build a portfolio of real estate now valued at $1 billion, and we want to use our experiences to help investors like you.
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For over 40 years, CVC has managed, owned, and operated real estate valued at over $1B1. Our buy-and-hold strategy, concentrated in America’s heartland, is designed to provide consistent investment returns. Want to learn more about investing in real estate vs 401(k)? Call CVC today! Get Started
1$1B figure based on aggregate value of all CVC-managed real estate investments valued as of March 31, 2023.
Eric Fisher, Chief of Staff
Eric joined Canyon View Capital in August 2021 with 15 years of hotel management experience grounded evenly between Property & Corporate Operations, and Business Development & Acquisitions. After $500M+ in hotel acquisitions, Eric uses his nuanced understanding of the acquisitions and transitions processes to support CVC real estate investments. His professional versatility makes Eric an invaluable resource for the President and Executive Team in all business functions, including Investments, Operations, and Strategy.