How I Earn Over 10% Passive Income With P2P Lending

Stack of money cash

Want some cash money?

The following is a guest post from my friend Jeremy Johnson who was kind enough to help me out with a random WordPress question issue when I first started back in 2009. I’m pleased to say he jumped head first into P2P lending when we spoke a couple years ago about diversifying his savings, and is doing well. 

Peer to peer lending is one of the most simple and effective ways I’ve ever found to make passive income. It has outperformed my stock picks, selling old baseball cards, my own business ideas – everything. I’ve earned more money through it than I’ve earned at anything else except my day job. This is pretty powerful for me. I’ll share a walkthrough of how this works for me and you can use/adjust for yourself.

Is A Backdoor Roth IRA A Good Move For Higher Income Earners?

Backdoor Roth IRAThere are three primary types of retirement plans in the U.S. today: Traditional IRAs, 401(k)s, and Roth IRAs. Although there are some other plan options out there such as SIMPLE IRAs, SEP IRAs, for the most part when people are talking about their retirement funds, they are referring to one of the three main types mentioned above.

It is often debated which of the two IRA options is better: the Traditional IRA that is tax deferred, or the Roth IRA that is funded after tax. Hypothetically speaking, if your earnings and tax rates went unchanged for your entire life, both types of IRA plans would net you the same amount of money in the end – it’d just be a matter of either paying the taxes up front or deferring them until later. However, it’s unlikely you’d actually be in a situation where those two variables would stay constant for your entire lifetime, since earnings and income tax rates regularly fluctuate.

I’ve been a staunch opponent of the Roth IRA because it’s never a good idea to pay taxes up front to a government who excels at wasting money. So long as you have your money, you can figure out ways to shelter your money from the government in a myriad of legal ways.

But what if you are a super pessimist who believes taxes have to go up because the budget is so poorly managed? Furthermore, you’re inept at navigating the many legal tax savings rules. In such a scenario, even those of us in the lowly 25% and under federal income tax brackets are probably not safe.

Should I Invest In Oil Stocks? Learn About Oil Price Fundamentals First

Oil price collapseOil is a popular topic due to its surprising ~50% price drop from June 2014 to early 2015. Nobody could have imagined such a quick collapse in oil. I certainly didn’t when I decided to buy a Honda Fit instead of a Jeep Grand Cherokee Limited last summer! If I had known I could pump my rolling 4th bedroom for less than $2.90 a gallon, I might very well have opted for the bigger car.

Given knowing what the hell is going on in the world is part of being a functioning citizen in today’s society, I decided to do some research into what happened. After all, I did purchase the oil ETF USO, a couple major integrated oil companies, an airline stock, and some auto stocks in my newest diversified investment portfolio for 2015 to try and make some money.

So what caused this significant drop, and how does this affect businesses, the economy, and our everyday lives? Is oil poised to rise once again? Let’s explore these questions and more.

Does Remodeling Pay Off? Probably Not!

Property Renovation

Manhattan Brownstone Living Room

In “How To Make A Lot Of Money In Real Estate: Focus On Expansion,” one of the questions was on whether remodeling really recoups the cost and provides such a large return.

One of the biggest fallacies homeowners have is thinking whatever they spend on remodeling will automatically bring them great returns when it comes time to sell. I used to think this way as well until I started remodeling and property expanding myself.

Let’s be clear. Almost all property remodeling does not recoup the cost spent remodeling based on national averages. Only in super expensive cities does remodeling sometimes bring in extra value to a sale because time is more valuable to higher income buyers. In such cases, home buyers in places like San Francisco, London, or New York may be willing to pay a premium to avoid the hassle of remodeling.

In order to create more value, remodeling (renovation) must include expansion. Do not confuse remodeling with expansion!

The Startup Journey: Alternative Investing With Sliced Investing Founders

Founders of Sliced Investing. Top: Akhil Lodha. Bottom: Mike Furlong

Top: Akhil Lodha. Bottom: Mike Furlong

One goal after leaving my corporate job of 11 years in 2012 was to learn more about the startup industry in Silicon Valley. I was coming from the old school finance industry where there was relatively little innovation compared to many financial technology companies today. Life was getting a little boring and I kept watching company after company we took public grow into great successes.

One of those companies was Google. I remember being excited seeing Sergei Brin, one of Google’s founders give a lunch presentation in downtown San Francisco during their IPO roadshow back in August, 2004. It was standing room only, so I wasn’t able to eat one of the manufactured plates of rubber chicken. We were one of the lead book runners, and I was inspired at how quickly Sergei, Larry and team were able to build something so huge, so quickly.

We are living in the golden age of tech/internet innovation. Five years ago, at age 32, I told myself that if I didn’t create something internet-related on my own or join a startup while having so much access living in San Francisco, I would kick myself in the face when I’m old.

Today, Google is one of my largest sources of traffic and revenue for Financial Samurai. Maybe it’s good karma for helping them go public, even though the IPO seemed shaky at the time with the last minute price decision of $85/share. Yes, we all should have piled in back then! It’s crazy how life comes full circle.

I discovered Sliced Investing on AngelList while vacationing up in Tahoe over Christmas break. With my tag-line “Slicing Through Money’s Mysteries,” I wondered if destiny was calling once again as I shot the founders a note to say I’m interested in helping them out. They kindly responded, and here I am.

I wrote off hedge fund investing until 2015 because I didn’t have the $500,000+ minimums to invest. It was just as well since the markets have been on fire since 2009 and hedge funds have underperformed. But in a way, I have been creating my own equity hedged portfolio with my accumulation of structured products since 2012. Give me 5-10% returns every year with low volatility, and I’ll happily invest all I can.

Sliced Investing smartly crowd-sources investor capital in order to make investing in hedge funds and alternatives more accessible to more people due to their minimum investment of $20,000. With the bull market entering its sixth year, I’m beginning to wonder how much more this baby can run. I’ll take under a 10% return for the S&P 500 for 2015 if anybody wants to take the other side of the bet!

In this interview, I want to understand the mindset of an entrepreneur. We’ll talk about risk-taking, the why, and how things came to be with Mike Furlong and Akhil Lodha, founders of Sliced Investing. I’ve got to imagine many people would love to be their own bosses and create a company one day as well. 

How To Make Lots Of Money In Real Estate: Focus On Expansion

Remodeling and Expanding

Building The FS Hot Tub!

In 2014, I bought a fixer for about $714 / square a square foot in the Golden Gate Heights neighborhood of San Francisco. Nobody really knows where the neighborhood is, and that’s just the way I like it because everybody eventually will! Golden Gate Heights is just several blocks west of UCSF and has homes facing the Pacific Ocean.

Real estate is my favorite asset class to build wealth because it is tangible, inflates with inflation, has preferential tax benefits, and provides an income stream if rented out. When I buy real estate, I’m the CEO of the property. When I buy a stock, I’ve got to trust the CEO and his or her management team to execute. Sometimes the CEO is great, sometimes the CEO sucks wind, yet still gets a multi-million dollar exit package that makes me sick.

Nobody cares more about your money than you. Hence, the goal for wealth builders is to own investments where you can better control the outcome. And if you can’t own investments that you control, let someone you trust manage your money if you don’t have confidence in managing your money yourself. I trust myself to work harder and scrutinize expenses and revenue more than anybody. My bottleneck is time.

In this post, I’d like to point out a very important rule before buying any single family home. If you follow this rule, I’m confident with the right execution, you will be able to make far more money than if you didn’t.

How Can We Help Level The Financial Playing Field?

Level Financial Playing FieldThere’s no greater feeling than helping people solve financial problems. I’ve always been someone to find solutions, rather than complain or pontificate why such and such is the way things are. Perhaps it’s the MBA side of me that always encourages problem-solving. Or maybe it’s the do-or-die ex-banker side of me who always had to close a deal or else I would never get paid or promoted. Taking action is always better than sitting on your ass, and just hoping things will get better.

But I’m torn by money because I’ve seen the entire spectrum of wealth; from the slums and favelas of India and Brazil to the mega-mansions in Pacific Heights and The Hamptons. Life is not fair. Some of us are born with a great foundation for achieving wealth. A few of us are born already wealthy thanks to the trust funds set up by thoughtful parents. However, the vast majority of us are born middle class or poor.

I’ve always thought one of the greatest ways to give back if you don’t have much money is to share what you know with others; to be a mentor. I’ve been fortunate to have two supportive parents who enabled me to study hard, think for myself, and take some risks. I often question “why me?” for achieving financial independence earlier than normal when I worked no harder, and am certainly no smarter than many other people.

To deal with my question, I simply write, and write, and write so that perhaps I may be able to help others seeking answers to a financial problem. The internet is truly the best medium for gaining knowledge today.

On October 20, 2012 I wrote a post entitled, “Financial Samurai Career & Personal Finance Coaching.” The post’s purpose was to help those who wanted 1-on-1 personal finance help from me beyond the free content that I write. I never published the post because I was embarrassed to charge any money to help people. It felt off to charge for advice given I’ve never charged anybody a penny since 2009. I’ve even welcomed people who don’t pay a cent to openly berate me about my ideas and opinions.

After a month of sitting on the post, I decided to finally put it up in my menu tab bar on the homepage without any public announcement. People did take notice to the tune of around five clients a month, but I didn’t have time, so I raised the price to $600 an hour in order to work with just two to three clients a month and it worked… for a while. However, I took the page on the menu tab off altogether because demand started growing again unbelievably.