Goal Setting Advice - Invest in 401k or Investment Properties?

[Anthony Zayas]

Greetings BPC! 

I decided to randomly take a trip this past weekend and self reflect in order to rebase myself and establish my goals for the next 3 years. However, I'm stuck on what I should do in the short term in order to achieve my goal. Any advice would be appreciated!

My Goal
Own a ~$1,000,000 ranch/farm in the suburbs of Philadelphia. This house would also serve as a retirement home for my Grandparents and sprouting for future family. 

Money Needed
The estimated mortgage payments would be ~$7000/month. However, I assume interest rates will rise within 3 years thus increasing my monthly payment. In order to afford the mortgage payment, I would need roughly $10,000 in gross cash flow per month. 

I currently make $7,000/month gross so I would need an additional $3,000/month in net cash flow to meet my minimum amount required. However, this would leave room for nothing else and I would be negative after accounting for living expenses. 

Ideally, I would like to net $2,000/month. From my math, this means I would need a gross income of ~$153,000. 
For a house of that amount, I would need ~$200k for 20% down, or ~$50k for 5% if going FHA.

Current Assets 
I currently own 2 properties, and are in the process of acquiring a 3rd or more. 

Property 1 - $118,000/$135,000 LTV
$700/month mortgage 
$1,100/month in rent
= $ 400 Cash Flow pre expense 

Property 2 - $0/+200,000 LTV
$0/month mortgage
$1500/month in rent (very conservative)
= $1500 Cash flow pre maintenance expense 

Potential Property 3 - $80,000 /$110,000 LTV
$300-350/month mortgage
$1000/month in rent 
= $650 Cash flow pre maintenance expense (expenses low due to newer roof)

I can possibly acquire 3 more properties almost identical to property 3 over the next 2 years. 

The Dilemma 
Knowing the above information. My company offers a 401k matching program of 25% of my contribution up to a maximum of 10% of my salary. If I were to acquire more properties similar to property 3, I would need cash for down deposits. Specifically  20%  for investment loans as I don't think an underwriter would be convinced that it is not an investment property since they are all within .1 miles of each other. However, If I were to save money for my long term goal in my 401k. I would have $31,875 to be used for hardship withdrawal for a mortgage payment (assuming I don't get raises/promotions). 

In Conclusion
Should I invest in my companies 401k program or use the money to acquire more investment properties? This is a mouthful/rant so thank you to anyone who decides to read this.

[Luis Sanchez Rodriguez]

Hey @Anthony Zayas

I would take my opinion with a grain of salt since I'm barely scratching the surface on this subject, but to answer your question...No. I would not invest in your company's 401K plan.

From my readings, your 401K is highly dependent on inflation and how the stock market is doing.

Instead I would say you look into Self-Directed IRAs since your goal is retirement.
Summary is you can use the funds you already contributed to your IRA and invest that into a new property. The catch is that you can not benefit from your property.
There's a lot to it, and like I said, I'm barely scratching the surface about this stuff.

I hope this helps in some way.