1. 401k vs. Investing in a House EGR 403 Team 3 James Coats – Summarizer Melanie Marin - Techie Chris Mui - Organizer

2. Type of project  Personal Investment  Find future worth  Fixed Input

3. 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

4. Personal Investing  Option 1: invest in a secondary house to rent out  Option 2: invest in a 401k

5. 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

6. 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

7. Summary  Option 2: Investing in the 401K is the better investment  401K: $4,300,000  House: $879,000

8. 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%

9. URL’s  rentals.realtor.com/rentals  eloan.com  payscale.com