Build reserves, buy next house or pay down debt?

[Derek P.]

I just recently purchased my 4th multi-family property this summer and now I am debating what my next step should be. My current goal is to reach 8k/month in cash flow. Here are my options as I see them. 1) Build up a separate capex reserve fund I have about 13k in savings and 25k in Roth IRA funds which I can withdraw tax free as a backup, but maybe I should build up a separate capex account since I don't have a designated one. 2) Purchase another 2-4 family I could use my 25k Roth funds as down payment on a 5th property that cash flows around $500/month and look to do a BRRRR. I don't think I have quite enough equity to do a cash-out refi (Each of my current properties cash flows between $500-700/month) 3) Pay down debt I have about 15k left on a car loan ($300/month) and 25k left on a 401k loan ($650/month) which I used to fund property 3 and 4. I am curious to know what you guys would do and am open to any other ideas! Thanks in advance for the input.

[Marcus Johnson]

Always remember this simple formula. Should your plans fail, what is your backup plan? Example, you start borrowing from your 401k or Roth IRA and are 40 years old and your real estate investment fails. Now you have no money and you're starting over and you still owe your 401k loan. Not exactly a wise move. Although if you've built up a sizable portfolio over time and you decide to take a chance on a real estate deal and it does fall through, well then you have something to fall back on.

But if you to a more wise and slow approach, you can find other ways to generate additional income, build up a 25% DP on a duplex that cash flows after all expenses and you have an EF fund, well you will sleep better at night and the odds that your investment will survive the tough times in your life is far greater then someone who sleep well at night with tons of debt who if anything should go wrong, which it does in life that person may be bankrupt.  Which sounds better to you?