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401k vs. Investing in a House. EGR 403 Team 3 James Coats – Summarizer Melanie Marin - Techie Chris Mui - Organizer. Type of project. Personal Investment Find future worth Fixed Input. Scenario. 25-year old engineer Single his entire life Beginning Salary: $52,000

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401k vs investing in a house

401k vs. Investing in a House

EGR 403

Team 3

James Coats – Summarizer

Melanie Marin - Techie

Chris Mui - Organizer


Type of project
Type of project

  • Personal Investment

  • Find future worth

  • Fixed Input


Scenario
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


Personal investing
Personal Investing

  • Option 1: invest in a secondary house to rent out

  • Option 2: invest in a 401k

vs


Option 1 invest in a secondary house to rent out
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


Option 2 invest in a 401k
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


Summary
Summary

  • Option 2: Investing in the 401K is the

    better investment

  • 401K: $4,300,000

  • House: $879,000


Sensitivity analysis
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%


Url s
URL’s

  • rentals.realtor.com/rentals

  • eloan.com

  • payscale.com


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