All Forum Posts by: Joseph Lambert

Aloha!

I really enjoyed the BP Money Podcast with the Golden Ratio Risk Parity Formula back in July- already listened to it twice and took copious notes!  :-)

  But there is one element of the 4% Rule (or even 5% Safe Withdrawal Rate dicussed on the Podcast): How or when do you account for inflation in your withdrawal amounts?  Yes, I understand that if I want $100k / year, you need $2.5M, and then you can withdraw $100k per year.  But $100k 30 years from now is not $100k today as we all know!  :-)  Do the projections and studies account for that in the 30 year timelines at all?

So my question for the group is: How do you adjust for inflation over the decades if you want to use a percentage?  In the Podcast, @Mindy Jensen is withdrawing 5% annually (or 1/12 of 5% monthly) of the $10,000 portfolio, or $42 per month.  So it will be fun to watch her and @Scott Trench and listen to the podcast as they continue to do this.  

But at what point does that $42 monthly withdrawal increase to account for inflation?  As 10, or 20, or 30 years from now, that cost of living is higher, and that same dollar amount won't cover what it does today.

So when considering withdrawals, how do we in the FI community update the monthly or annual withdrawal amounts if we want to adhere to the 4% rule?  That element of the 4% Rule has always confounded me!  :-)

Mahalo!

-Joe

Aloha!

I am looking to get some recommendations for PMs that have experience with retirement communities like Sun City in Palm Desert.  What are the typical management fees?  Are there any restrictions in communities like that?  What are vacancy rates?  What are estimated monthly income for a 3/2 there?

Appreciated,

Joe

Aloha Andrew- I am also an out of state investor with a property in Vance, AL and have had good experiences with America's Rental Managers (ARM). If you need some specific points of contact let me know- shoot me a text or email.

I have 2 long term rentals in the Springs.  I've actually been investing there since 2002 when I used to live there.  I have gone through 5 total investment properties there, and the 2 currently there I plan to hold indefinitely as they are doing great.  My current Property Manager there is Action Team Realty, and I am very pleased with them.  They keep both of my LTRs rented, and have a good staff, responsive and clear communicators.  If you're interested, shoot me a text or email, and I can do a warm introduction to them.

Great write up!  We bought our condo in Puhi on Kauai back in 2015, and experienced most of the same as you did when we renovated back in 2016!  I probably made over 100 trips to Home Depot that summer….  At any rate, it was the best investment we ever made!  We ended up moving full time to Big Island, but we love Kauai so much too.  A truly special place!  

I used Chad with https://redmountaininspections.com/ for a Single Family Home purchase I just made in Vance, AL.  He serves all of Birmingham area.  I was very impressed with his report, and his thoroughness.  He was also able to adjust his schedule as I needed, since we had to change our scheduled date based on a few factors and he didn't have any issues in rescheduling the time/day.  Rate was very reasonable too.  Spoke with him on the phone first, and he sounds receptive to conversations so you could run your questions past him in advance probably as well. 205-607-2082 is his number.

Aloha Byoung! I see a lot of similarities between your search and what my wife and I did about 10 years ago, before moving to the Big Island in 2021. Back in 2015, we wanted to invest in a property in Hawaii to ensure we had exposure to this market since we wanted to move here. We thought about occasionally using it so at first were thinking STR, but were open to a LTR. We ended up going with a LTR. The previous comments above are spot on- it is very difficult to cash flow with only 20% down in either scenario, and then also yes, you do need an on island representative designated.

So while cash flow at 20% down is tough, there is the appreciation- the property my wife and I bought remotely in 2015 we bought for $220k, and that complex all the condos now go for over $500k.  We were losing a little bit of money each month for several years on the long term rental- but we were good with that in order to have that exposure to the Hawaii market.  The LTR market out here is in extremely high demand, so our property is rarely vacant.  We ended up keeping it and bought another property in 2021 for our primary.  That property purchased in 2015 has been our best investment by far!

Another option: If cash flow is important, maybe consider a less expensive property so you can put a higher percentage down. For example, in Waikoloa Beach, a 2/2 may go for $900k-$1M+. But then a 2/2 condo 10 minutes away in Waikoloa Village that can still be an STR (or LTR) can go for below $400k. So if you had $200k, while that is around 20% down on a $1M property, that is 50% down on a $400k condo- and in that situation you may be able to cash flow!

Don't forget about Property Management fees too in your calculus: For a STR you are looking at probably around 25%, while LTR is more in the 10% range for PM.

All that said- I would definitely say that we are entering a Buyer's market here on condos- opportunities are definitely there. I helped a client sell a condo in Waikoloa Beach last summer for $945k, and that same complex, same floorplan, I just saw a comparable one get reduced down to the $700's before finally going under contract! I also have a listing now that my clients' current asking price is less than what they paid for it 2 years ago- also a desirable complex with a STR permit in place. The condo inventory is rising, and fewer investors are swooping up those condos, leading to Buyers definitely having some opportunities.

Best of luck- if you have any questions I'm always available for a chat or text.

Looking forward to this!  Thank you for setting it up.  Looking forward to networking with other investors and builders here in the Village!

Aloha!

Investing in Hawaii for yourself and for your family is an amazing idea.  My wife and I first invested here in 2015 and it was one of the best investments we’ve ever made!

Are you only looking on Oahu, or are you considering other islands?  They each offer very different options, and each have different STVR rules as well.  I’m over here on Big Island, up in the Kohala coast, and it offers some resort areas too on the sunny western side similar to Ko Olina on Oahu.

So things to consider are:

- Which Island

- Your budget

- Will you be financing or paying cash?  The more you put down will of course help with cash flow.  It’s very hard to cash flow with only 25-30% down, and usually takes much more. But for some, including myself when we bought in 2015, breaking even or even losing a little each month was okay in order to own a property in Hawaii that we could also use ourselves.

- Does the condo have an existing STVR permit or will you need to apply for it? If you need to obtain it, how difficult will that process be?  I’m familiar with the process over here, but not on other islands and not Oahu.

- Is it furnished and turnkey, or will you need to furnish it?  Not only is furnishing it expensive, but also takes lots of time and coordination.

- Who will be your Property Manager?  This is an important decision- I have a few PMs I can refer you to over here.

- Depending on your budget, do you want a small condo or larger residence?  That is, do you want a 1/1, a 2/2, or will a studio work? or depending on budget, are you looking for more of town home?

- Do you want an ocean view, or is proximity to the water or to resort amenities like fine dining or shops most important?

Lots to consider!  So good luck! 

Joe