401k vs. investing in a house egr 403 team 3 james coats – summarizer melanie marin - techie chris...
Post on 15-Jan-2016
218 views
TRANSCRIPT
![Page 1: 401k vs. Investing in a House EGR 403 Team 3 James Coats – Summarizer Melanie Marin - Techie Chris Mui - Organizer](https://reader035.vdocuments.site/reader035/viewer/2022062322/56649d5f5503460f94a3f598/html5/thumbnails/1.jpg)
401k vs. Investing in a HouseEGR 403Team 3James Coats – Summarizer Melanie Marin - TechieChris Mui - Organizer
![Page 2: 401k vs. Investing in a House EGR 403 Team 3 James Coats – Summarizer Melanie Marin - Techie Chris Mui - Organizer](https://reader035.vdocuments.site/reader035/viewer/2022062322/56649d5f5503460f94a3f598/html5/thumbnails/2.jpg)
Type of project
Personal Investment Find future worth Fixed Input
![Page 3: 401k vs. Investing in a House EGR 403 Team 3 James Coats – Summarizer Melanie Marin - Techie Chris Mui - Organizer](https://reader035.vdocuments.site/reader035/viewer/2022062322/56649d5f5503460f94a3f598/html5/thumbnails/3.jpg)
Scenario 25-year old engineer Single his entire life Beginning Salary: $52,000 4% Avg. yearly increase Owns his current house and wants
to know what is a better investment
![Page 4: 401k vs. Investing in a House EGR 403 Team 3 James Coats – Summarizer Melanie Marin - Techie Chris Mui - Organizer](https://reader035.vdocuments.site/reader035/viewer/2022062322/56649d5f5503460f94a3f598/html5/thumbnails/4.jpg)
Personal Investing
Option 1: invest in a secondary house to rent out
Option 2: invest in a 401k
![Page 5: 401k vs. Investing in a House EGR 403 Team 3 James Coats – Summarizer Melanie Marin - Techie Chris Mui - Organizer](https://reader035.vdocuments.site/reader035/viewer/2022062322/56649d5f5503460f94a3f598/html5/thumbnails/5.jpg)
Option 1: invest in a secondary house to rent out
Initial cost of house: $530,000 Location: Phillips Ranch Pomona Monthly rent: $1,900 Increase at half of inflation rate Assume 3% inflation
![Page 6: 401k vs. Investing in a House EGR 403 Team 3 James Coats – Summarizer Melanie Marin - Techie Chris Mui - Organizer](https://reader035.vdocuments.site/reader035/viewer/2022062322/56649d5f5503460f94a3f598/html5/thumbnails/6.jpg)
Option 2: invest in a 401k
Money invested is equal to the amount invested in the house yearly
Down payment was split by 30 years and invested in the 401K yearly
Assume a constant 401K rate
![Page 7: 401k vs. Investing in a House EGR 403 Team 3 James Coats – Summarizer Melanie Marin - Techie Chris Mui - Organizer](https://reader035.vdocuments.site/reader035/viewer/2022062322/56649d5f5503460f94a3f598/html5/thumbnails/7.jpg)
Summary
Option 2: Investing in the 401K is the
better investment 401K: $4,300,000 House: $879,000
![Page 8: 401k vs. Investing in a House EGR 403 Team 3 James Coats – Summarizer Melanie Marin - Techie Chris Mui - Organizer](https://reader035.vdocuments.site/reader035/viewer/2022062322/56649d5f5503460f94a3f598/html5/thumbnails/8.jpg)
Sensitivity Analysis
401K balance equals the house balance $878,757.77 when 401K yearly rate is 0.003%
House balance equals the 401K balance $4,345,194.19 when the house appreciation is at 7.9%
![Page 9: 401k vs. Investing in a House EGR 403 Team 3 James Coats – Summarizer Melanie Marin - Techie Chris Mui - Organizer](https://reader035.vdocuments.site/reader035/viewer/2022062322/56649d5f5503460f94a3f598/html5/thumbnails/9.jpg)
URL’s
rentals.realtor.com/rentals eloan.com payscale.com