I'm 43 and currently rent an apartment in NYC. I want to buy a home as a rental property in Atlanta, GA as a rental property. My hope is to move into the house once I retire. Which would be 17 years from now. I would need to reduce my 401k contribution from $18k to $8-10k a year to cover the expense. Is this a wise investment?
In general, I am not a fan of any type of investment opportunity that requires one to have to reduce their 401k contributions to cover the expenses — especially for a rental property. The reason is that there are so many uncertainties with rental properties. For example, will you be able to get tenants, will they be good and reliable tenants always paying and not causing damage, will you for sure want to live in that area of Atlanta 17 years from now (neighborhoods and health situations can change), will you feel comfortable with the added work that comes with being a long-distance landlord (or comfortable with the additional costs of hiring a local property manager).
On the surface rental properties can seem like a very enticing investment; but by definition, they involve a lot of uncertainties. By contrast, the stocks and bonds in your 401k plan will never call you at 2am to complain about a clogged toilet! Generally speaking, I find the time to consider rental property situations like this are when one has extra funds above and beyond what they can currently use to max out their existing workplace and IRA contributions (taking into consideration as well the ability to increase those contribution due to the “step up” opportunity that happens once you are 50 years old to contribute even more).
For a more precise answer, because every situation is highly personal, I strongly recommend you visit with your local TIAA licensed financial advisor who can help you run the numbers and see where you are vis-a-vis being “on track” for a comfortable retirement.
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