{ "media_type": "text", "post_content": "What generally produces better returns - 401k invested in index, or landlords with leverage?", "post_id": "613f88c96acdf40022b15c53", "reply_count": 10, "vote_count": 1, "bowl_id": "552d1d24dc1c586b09d2d051", "bowl_name": "Consulting" }

What generally produces better returns - 401k invested in index, or landlords with leverage?

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My index funds returned more than 20% last year. And not once did they set the side of my house on fire with the grill.

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This sounds obvious but in general you want both, diversify and win when either wins, lose less when one tanks

We learned during the pandemic that if you’re a landlord, your rent payments can be suspended at anytime. Set it and forget it in stocks

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This sucks so much……..

Depends on how much leverage. Generally index though

Being a landlord is a lot more demanding, and there’s no “general returns” for that. It depends on where you buy, what kind of real estate, etc. It’s also not something you can cost-average, you need to understand the market and time it correctly. If you can do that, and don’t mind the hassles of dealing with renters/having to fix up the place, the returns are probably much higher (I have first-hand anecdotal evidence that you can make 20-80% per year when you time it well).

Not an apples to apples comparison: 1. Being a landlord is a lot of work even if you have a property manager (and they’re mostly useless IMO unless you have many properties). Are you adjusting for the value of your time spent landlording vs. passive index fund investing? 2. Comparing a leveraged to unleveraged investment doesn’t make sense - you have to separate out the benefit of the leverage from the underlying investment. Not to mention totally different risk/return profiles…

1. Yes, I account for it by “charging” 6% of rent for management to myself. 2. Good point, it’s just that I have no access to gain that kind of leverage on stock purchases, but mortgages are truly abundant these days.

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