All Forum Posts by: Henry J.

John Park That’s a great position to be in. Congrats! If the properties are owned under your personal name (not LLC or C Corp), and you have a mortgage against them, and you already have CapEx and vacancy reserves all set up, then that’s money you can spend. In terms of taxes, as someone already posted, only the ‘net’ portion will be taxable after you write off depreciation, expenses, mortgage interest and property tax. Usually you will not have any taxable income after that. I think LLC is pass through income so should be similar. Not sure about Corp. Definitely talk to your CPA. Thanks. Henry

Juan Rosado Hi Juan, 50% rule already includes the property tax. 50% rule is only good for quick analysis. Unless you know for sure your expenses will fall under 50%, it’s best to work out all the details (property tax, insurance, repair, PM, etc) so you know what you are getting into in each category. From my DFW experience, I’ve been spending more than 50% on expenses. Good luck getting into your house hack! Henry

@Peter Sinclair

Congrats!  Where (roughly) is this property and how did you find it?  I didn't think it's possible to find a cash flow duplex around East LA.  

Thanks!

Henry

@Mark Smith

I will 3rd what @Daniel Kurkowski said.  What are your goals and work towards them accordingly.  

If you decide to invest in 401K, make sure you find out what kind of funds your company offers and don't invest in high fee hedge fund type.  Roll them into low fee index fund like Vanguard S&P 500 index fund, etc.

Good luck figuring it out.

Henry

@Account Closed wrote, look into local credit unions to see if you can get lower loan amount there.

Good luck there.

Henry

@Jia Liu

I'm considering borrowing from my 401K to do some RE investment.  Not sure if that's the info you're looking for.

For my work 401K, I can borrowing up to 50% of my account (up to $50K) with an interest rate of 5.25%.  I can repay the loan back from 1-5 years.  The re-payment will be after tax, deducted from my pay check.  If I leave the company before I finish paying back the loan, I can either continue paying back until maturity, or pay 10% penalty and treat the loan balance as income / early withdraw.

Check with your HR on your 401K loan rules.

Henry

@Josh Stack

Be mindful 2 years of data is not sufficient for TK evaluation because 1) I haven't sold it yet so I will incur selling cost of 6-10%, 2) I haven't experienced much CAPEX / turnover so COC return isn't really meaningful until I sell.

TK projected return which didn't account for vacancy - 16% return based on 20% down, including principal pay down.

My own expectation with 1 month vacancy - 6.5% based on 25% down payment, not including principal pay down.

Actual - 

2016 return - about $2800 / 11% return, not including my travel expenses ($600) to visit multiple properties, and not including principal pay down.  

2017 return - I haven't gone through and updated my spreadsheet yet but I expect a loss or at best break-even.

Hope that helps.

Henry

@Josh Stack

How many years of performance are you looking for? I've bought TK and through brokers since 2012. What you need to be mindful of is Capex / turnover. I just experienced my 1st TK turnover after 2 years and it wasn't too bad on the repair (~$1000), until a couple of months later the AC broke and there went $2K (about 8 months worth of cash flow). I think I'm still positive overall - but I will have to update my spreadsheet to see where we are. Again, only 2+ years of TK to share at this time.

@Account Closed

how about Amazon merch to start selling t-shirts?  :)

not sure if i can post the link here but google it up.

@Yoshi M.

I'm not sure which has better return - stock market or RE.  It's been discussed / argued many times in the past and I'm sure it will continue to be a hot topic for years to come.  Regardless, I think it depends on the time period and location so you'll get different answer depending on what people use.

If you're not sure you want to live less than you can so you can save more for the future, perhaps you should start with a budget.  Identify what's "nice" to have and maybe set up goals to treat yourself when you achieve your goals.  

There are pluses and minuses with both ROTH 401K and REI. Do you know your investing personality? Are you risk averse? Do you want to know all the details of your investment?

If anything, contribute enough to get the full company match, and save the rest outside your 401K to buy RE locally and manage them yourself.  Also, make sure you find out what funds your ROTH 401K offers and ask your HR to provide fee info.  Look for simple index funds with low fee and invest for the long run.  I only wish I maxed out and had the ROTH options when I first started.

Good luck deciding.

Henry