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All Forum Posts by: Johnny Aloha

Johnny Aloha has started 6 posts and replied 94 times.

Post: Do you need an LLC? Absolutely. There is No Debate About It.

Johnny AlohaPosted
  • Investor
  • Charleston, SC
  • Posts 106
  • Votes 18
Originally posted by @Dmitriy Fomichenko:
Originally posted by @Thomas Coburn:
@Dmitriy Fomichenko:
2) Make new contribution. Unfortunately traditional and Roth IRA contributions are only $5,500 per year so it would be difficult to do some serious investing with that amount. If you are self-employed or a small business owner however, you can start Individual (also known as Owner-only) 401k and contribute as much as $53,000 per year! With this amount you have a lot more investment choices to self-directed your account.

Dmitry - Your answer helps A LOT. Thank you.

We are self-employed. Our business attorney set us up with SIMPLE IRA's about 7 years ago. So, my wife and I are both contributing whatever the maximum is. I think it's about $12K/year each.

HOWEVER... a few of my mentors have personally drained all of their retirement accounts. They've paid the gains just to be done with them, and then used the cash to invest in real estate, betting on themselves rather than being tied to the stock market. 

I've seriously been considering this. I'd be very interested in hearing your investing opinion on this.

Thomas, did I understand you correctly: are you saying that some of your mentors took early distributions from their retirement accounts, paid taxes and penalties and used what's left to invest in real estate?

In my opinion this is a poor financial choice for most people. Taxes and penalties could wipe out 35-50% of your retirement savings if you take early distribution. 

I agree that investing in the stock market that most of us have no control over is not a good choice, but that is where self-directed IRA or Solo 401k comes in. It allows you to have total control over investment choices and gives you the ability to invest in something that you understand and have more control over (real estate, trust deeds, tax liens, private lending, private businesses, etc).

 Actually, there is a hug body of research suggesting (proving) that not having control is THE BEST way to earn good returns.  

Looking at your title, I'm sure you are aware of the work of John Bogle, William Bernstein, and other advocates of low cost, long term investing. Meaning that you keep buying, no matter what, into low cost index funds (or if you are capable of security analysis, individual securities emphasizing low turnover) and over a period of 20-30 years you will wake up rich - especially if the investment was in a tax-advantaged account (401k, Roth, T-IRA).

I am not saying stocks are better than RE, or vice versa.  Both have a place in a portfolio for building wealth, but psychology is probably the most important factor to earn decent (~10%) annual returns over long periods in the stock market.  Doing less is definitely more in this case.  

Just my $.02!

Post: Do you need an LLC? Absolutely. There is No Debate About It.

Johnny AlohaPosted
  • Investor
  • Charleston, SC
  • Posts 106
  • Votes 18

@Jonathan Twombly

I agree with most of what you said, and thanks for taking the time to write it out.

However, there's one important aspect in which I think you were incorrect: 401(k)s and IRAs are typically protected from creditors, although each state has different protection levels.  Also, personal residences may be protected, depending on the state.  I'm not sure about 529s, although it's reasonable to assume that would be protected because 1) they are so similar to IRAs, and 2) the beneficiary is someone other than the RE investor (typically).  I haven't seen specific information on 529 protection though.

One important caveat, most states will re-consider the protected status if there is gross negligence.

Post: Primary Home + ADU as Vacation Rental in HI = Worth It?

Johnny AlohaPosted
  • Investor
  • Charleston, SC
  • Posts 106
  • Votes 18

@Brie Schmidt Thanks for the shout!

@David L. recommended (when smart people like her make recommendations, I always listen!).  Be cautious on the expenses though -- very unlikely you will ever approach a 50% expense ratio in Hawaii since there are no heaters, air conditioners, and vacancy is non-existent.    

I invited a friend to help build it with me, and you can read more in a series of blog posts here.  I would recommend a couple things:

1.  if you are on a tight timeline, hire an expediter to pull permits.  It was the best $1200 I spent on the project.

2. Size matters - you'll get the most bang for your buck if you build a smaller ADU (like 300-350sf). I analyzed several size scenarios, and the smallest one had the highest ROI.

3.  Don't skimp on electrical or plumbing since those are required to be done by a licensed person, but all the other stuff you can do on your own if you are so inclined.  Also, you should be able to find some great materials on CL for cheap.  There's some suggestions for saving money in the link to the blog above.

Is 7% a good return? That's a different answer for every investor.  When you are projecting returns, you should have a benchmark to compare against.  It would not be a good return for me, because of the credit and liquidity risks of real estate.  I think (long term) the stock market (VTSAX) will do 7% with much better liquidity, no work, and no credit risk ... so I would not do a deal if it was only 7% return.  If it was a negative return, I would definitely not do it ... unless it was more of a flip and you were expecting a quick sale after you pick up the value boost from an addition.

Best of luck!

Post: Cash flow on Oahu?! In escrow on my first property!

Johnny AlohaPosted
  • Investor
  • Charleston, SC
  • Posts 106
  • Votes 18

It took 24 hours to rent out?  I guess the market slows down in the holidays!!

Post: Cash flow on Oahu?! In escrow on my first property!

Johnny AlohaPosted
  • Investor
  • Charleston, SC
  • Posts 106
  • Votes 18

Congrats @Sarah Lam.  Is the rent the same as you projected before you purchased it, or above?

Post: Cash flow on Oahu?! In escrow on my first property!

Johnny AlohaPosted
  • Investor
  • Charleston, SC
  • Posts 106
  • Votes 18

@Sarah Lam@Duc Ong

Sorry, my handyman guy can't do the job in Aiea (he's in Kailua).  The contractors are all so slammed right now, they are only taking the most lucrative jobs.  Sorry I couldn't help ...

By the way, Stott Real Estate (in Kailua) produces a GREAT monthly market report.  They send it by email after the month's statistics are released.  you can google their website and they'd be happy to add you to the distro.

Post: Cash flow on Oahu?! In escrow on my first property!

Johnny AlohaPosted
  • Investor
  • Charleston, SC
  • Posts 106
  • Votes 18

Congrats @Sarah Lam!  The construction industry is crazy right now.  For example, carpenters are very high demand and average about $40/hr as a W2 employee - if you have a small job (like a full remodel in a condo), be sure to vet them thoroughly and not pay anything in advance.  Agree on a draw schedule, because you don't want to put up 50% of the cost initially, then have them bail.

I might have a recommendation for a handyman kind of guy who has helped me on remodels in the past.  All the contractors I know have a 10+ month backlog of work.  I'll PM you if he is interested ...

Post: Looking for mobile home investors in Greenville, SC

Johnny AlohaPosted
  • Investor
  • Charleston, SC
  • Posts 106
  • Votes 18

@Justin Smith Yes, he can leave a message and I'll get back to him.

Thanks

Post: Looking for mobile home investors in Greenville, SC

Johnny AlohaPosted
  • Investor
  • Charleston, SC
  • Posts 106
  • Votes 18

I have a mobile home park in contract in Greenville, SC.  The park is in a good location, city water/sewer billed to tenants, and very high demand.  My CL add had 66 calls and 11 emails in 1.5 days.

There are 20 park owned homes that come with the deal.  If there is an investor interested in purchasing and renting out the individual homes, please PM me.  

Homes range from 1969-2013. There are: (1) 1br, (12) 2br, and (7) 3br.

Thanks!