Here’s our latest interview with a millionaire as we seek to learn from those who have grown their wealth to high heights.
If you’d like to be considered for an interview, drop me a note and we can chat about specifics.
My questions are in bold italics and his responses follow in black.
Let’s get started…
OVERVIEW
How old are you (and spouse if applicable, plus how long you’ve been married)?
We are both 53.
We’ve been married for 30 years.
Do you have kids/family (if so, how old are they)?
We have three daughters ages 22, 19, and 16.
What area of the country do you live in (and urban or rural)?
Midwest suburban.
What is your current net worth?
$15.9 million.
What are the main assets that make up your net worth (stocks, real estate, business, home, retirement accounts, etc.) and any debt that offsets part of these?
- Roth IRA spouse $1.75 million
- IRA $500,000
- Brokerage $500,000
- Cash $1 million
- Real Estate $30 million less $19 million debt
- Real Estate partnership interests $1.4 million
- Florida development $1 million
- Primary home $500,000 debt $175,000
- Lake Home $200,000
- Misc investments including part ownership of a golf course and a building that houses a brewery $225,000
- Less deferred income taxes if real estate was sold $2.0 million
EARN
What is your job?
No job working for someone else since 1996.
I’m currently a real estate investor, part-time developer, and stock market investor.
What is your annual income?
- $2.55 million pre-mortgage payments
- Less $834,000 interest expense
- Less $547,000 principal paydown
Pre-tax real estate cash flow of $1,169,000.
Does not include development profits that vary from $0 to $400,000 a year.
All stock market earnings and dividends are reinvested.
Tell us about your income performance over time. What was the starting salary of your first job, how did it grow from there (and what you did to make it grow), and where are you now?
My wife and I both started at $23,000 in 1987 as CPA’s for big 8 accounting firms, now big 4.
I left to work for one of my clients after 2.5 years in the manufacturing industry for $37,000 a year.
My wife stayed in public accounting through manager level and left making around $60,000 a year to work part-time and be stay-at-home mom.
About six years after starting work I was CFO for a start up company earning $75,000 base, $75,000 bonus, plus $100,000 a year in company stock.
I left that 1996 after saving a million dollars to pursue my MBA full time. After my MBA, I started an IT consulting firm with a high school friend as well as joined a local real estate development company as a partner.
What tips do you have for others who want to grow their career-related income?
There are four aspects to your pay as an employee:
- Base pay
- Bonus for individual performance
- Bonus for company performance
- Restricted stock or stock options
Benefits could be a fifth but usually they seem to go along with bonus.
Many people focus on only their base pay. The guys I know that made the most money early in their careers were those that were relatively early employees in quickly growing companies that had a successful liquidity event. Many times these same employees jumped from start up to start up, collecting a new set of options at a new employer.
What’s your work-life balance look like?
Excellent! I read a lot, study investments, work out, and oversee current investments.
I rarely miss any of my kids activities and only travel when I choose to.
Do you have any sources of income besides your career? If so, can you list them, give us a feel for how much you earn with each, and offer some insight into how you developed them?
My income comes primarily from investments in real estate.
SAVE
What is your annual spending?
About $250,000 to $300,000.
What are the main categories (expenses) this spending breaks into?
We track our investments in Mint and Personal Capital and utilize credit cards for miles on as much business spending. My goal is add $1 million a year plus to net worth and if we are achieving that, I don’t worry that much about spending.
Kids education and activities are a top expense. My oldest had a horse and competed in eventing until joining the working world last summer. My middle was a competitive dancer until college and my youngest is a golfer.
All three went to school at our church through 8th grade and then public high school.
My oldest graduated from public state school and my middle is in a public college and studying abroad this semester. We have spent a ton of money in this area and I don’t have a single regret about any of the spending.
Academically my kids have excelled so I am glad to support their schooling expenses. Go Cocks and Go Vols.
House, lake house, boats and RV — it adds up but the experiences with family and friends are worth it. These would also be easy areas to cut expenses if our family is too busy to utilize.
Supporting our church and other donations — we tithe our income and will likely try to shift to a donor advised fund at some time.
Travel, usually a couple significant family trips a year, snow skiing out west, Mexico, Europe. Other smaller trips during the year to visit family in Florida and kids at college. We have Southwest companion passes and many miles from credit cards so most flights are free. I like how others have set up separate travel spending accounts and will likely do that in the future.
Cars, we have too many and need to have one or two fewer. We buy mid-price new cars for basic transportation and keep for a long time. I have a higher end used convertible.
We eat out fairly often but usually not very expensive.
Housing improvements and decorating are a fair amount.
Property taxes in Illinois are obscene at $15,000 for a $500,000 house that never increases in value.
Entertainment, cell phones, etc add up.
Do you have a budget? If so, how do you implement it?
We have a high level budget and as long as net worth is increasing at a minimum of a million a year our spending will likely trend up rather than down.
We could easily cut spending but are comfortable with our spending level compared to income level at this time.
What percentage of your gross income do you save and how has that changed over time?
Including all income we are saving about 50% to 70% a year after taxes.
When we started our jobs we saved about 10 to 15 percent a year. Once more income was coming from bonus and stocks our saving percentage went up significantly to closer to 40 or 50%.
What is your favorite thing to spend money on/your secret splurge?
Travel is our absolute favorite, experiences are a close second and closely related.
INVEST
What is your investment philosophy/plan?
Continue investing and growing our net worth every year. Try to be prepared for the next downturn that absolutely will come.
What has been your best investment?
My education.
I graduated in the bottom half of my high school class and went to Western Michigan University to major in Accounting. The cost per credit hour was about $40 or $1,200 per year or just over $4,800 for a four year degree in accounting.
The education I received at WMU allowed me to pass all parts of the CPA exam right after graduation without taking a review course. It prepared me well for a University of Chicago MBA. In my first class at UC in micro economics, I had the highest grade in the class. Many of the students in the class were from top tier colleges from around the world.
My education at both WMU and UC has been absolutely invaluable to me in so many ways. I never would have had the opportunity to be a CFO at a start up without it.
I utilize financial analysis of investments on a daily and weekly basis and my school foundation is what has allowed me to be a successful investor in real estate and the stock market.
As an added bonus I met my wife at WMU and I genuinely married up in every way.
What has been your worst investment?
Way too many to count.
I have easily lost $40 or $50 million dollars of equity and cash, maybe more.
My single biggest mistake was selling 1 million shares of GGP stock at $.44 a share in 2009 based upon the opinions of others rather than relying on my own analysis. Those shares have grown to over $30 million in value over the last ten years.
I had about 35% of a consulting company that we turned down $12 million cash offer to pursue a merger/IPO at a $52 million dollar valuation. I ended up selling my share to my partner for $180,000 after IPO window closed and the tech market crashed.
In 2008, I was a partner in a real estate development company that we could have each walked away with ten to fifteen million dollars that went to less than zero value after taking into account personal guarantees on debt.
What’s been your overall return?
Crazy good on real estate, most projects have 50% to 100% plus annual return on equity invested. Much of that is due to leverage that is incredibly dangerous and only should be pursued with great caution and a really good back up plan.
My strongest return over the longest time frame is my wife’s IRA. It was funded from 1988 to 1994 with 10 to 15% payroll deduction.
From 1988 to 2008 was the accumulation and market return time frame. The account grew from an initial investment of about $40,000 of payroll deductions to $144,000 in late 2008. It was converted to a Roth at that time so I know exact value. That was about an 8 percent annual return over the first 15 to 20 years.
From 2009 to 2018 the account has increased from $144,000 to $1.87 million at end of 2018. That is about a 30% percent annual return over ten years.
Much of it was front loaded in 2009 and 2010 when everything was on sale and it was aggressively invested.
Some of it was backloaded in 2018 when the account went from $1.13 million to $1.87 million though investing for 1% percent gains.
In 2018, I bought and sold $54 million in stock in that account with none of it on margin. The average gain per trade was 1.37 percent.
The first trade of the year was Brunswick boats. I was buying a pontoon boat and the boat dealer shared how boat sales were going crazy and had never been stronger. I looked for a trade in the space and choose Brunswick due to Mercury Marine and their many boat lines.
I traded SPY a number of times. I traded Berkshire more than any other stock. I traded HA. I tried to only buy stocks that had very high intrinsic value and were not at risk for a substantial decline.
Most individuals are much better off investing in low cost index funds and its likely more money is lost than made on individual stocks.
In real estate, I never lost money on a project from 1999 to 2008, until one day they all declined in value together. Returns on equity in development were usually 100%, if not more. That is due to leverage. Unlevered returns would have been about 12% per year.
With buying distressed real estate assets in 2011 to 2015 our return on equity was 50% to 100% annually when combined with low cost debt. Unlevered would have been in the 10% to 14% range. I could not have rebuilt my net worth in ten years without using leverage unless I kept the GGP stock.
Once my debt is paid off, I am unlikely to ever utilize debt again for anything.
Lackluster on my own IRA, likely one or two points under low cost index funds.
How often do you monitor/review your portfolio?
Every day I monitor it and consider if I should be doing something different.
Every week I consider selling some real estate to pay off all my debt. It comes with a pretty big tax burden and transaction costs so I am on hold until I see interest rates trending up.
NET WORTH
How did you accumulate your net worth?
I have met my net worth goals three different times and lost most of it two times.
To save your first million is absolutely the most challenging.
We started work in June 1987 and achieved saving our first million by June 1996 or nine years at 30 and 31 years old. I would like to say we did it through frugal living but we did not.
We bought new cars, we had a boat and we bought a pretty nice house. We traveled a lot. We consistently saved 10 to 15% of our pre tax income along with employer matches and never spent more than we made. We were a double income professional family without kids so living within our means was actually pretty simple.
The IRA savings likely got us to about 20% of the million dollar goal over the nine years. Home equity added another 5%. Saving of bonuses added another 5 to 10 percent and well over half came from stock appreciation/ownership in a start up I was CFO of.
The CEO who was my mentor was pushed out by the primary investor in the company that wanted to be CEO three months before the IPO. I stayed three months after the IPO and then left to finish my MBA full time.
From that initial million in savings:
- I paid my MBA tuition — that was a great investment.
- We bought a used ski boat (not as good of investment but really fun)
- I started and funded an IT technology company with my friend of mine from high school.
- I joined a local real estate development group and funded my share of equity as a part time partner overseeing finance and banking.
Our timing on the IT firm was the end of 1998 just as companies were spending millions on IT upgrades on ERP systems. My friend was a manager at KPMG and had many contacts for recruits and clients.
Our business model was simple — we hired as many consultants as we could from the big 5 (at that time) firms with 1 to 3 years experience. We offered our clients a better value for the dollar than the big 5.
We shared equity in the company and created a profit sharing model for every consultant based upon their individual performance. We had company trips to warm destinations with inviting spouses and significant others. We had a company boat and our office was next to Wrigley field. A couple times a week we held social/recruiting events. We had 100 percent acceptance rate on our first 40 or so job offers.
Our core strength was we were a great place to work for top performing IT consultants. We paid generous referral bonuses if both you and the people you recruited stayed with the firm.
Over about 18 months we grew to over 100 employees and a very profitable $20 million in annual sales. We decided an exit strategy made sense and considered an all cash offer for $12 million or a merger and IPO at a $52 million dollar valuation for our part of the combined company.
The IPO was the easy decision. We had our joint S1 done, one of the best California underwriting teams, and were a couple weeks away from pricing our IPO in late August 2000.
The NASDAQ started softening in March 2000 and by end of August the IPO window slammed shut. That was followed by massive pullback in corporate IT spending. The consultants were the first to be cut to save money at our clients.
It is no fun to shrink a company so I sold my ownership to my partner for $180,000 and shifted to real estate development full time. My partner still has the IT business and it’s doing well. I developed amazing friendships with some of our early employees and many of them went on to starting their own companies.
The excitement of starting a new company is unbeatable and I would do it again as an investor/advisor/board member for the right opportunity anytime.
So it’s now the end of 2000 and my net worth dropped by $10 million of equity in the consulting firm that evaporated.
Our net worth is still a solid $2 to $3 million from real estate investments and stock market investments. Over the next seven years we grow the real estate portfolio to a $130 million real estate portfolio with $100 million of debt and the three primary partners are all earning substantial income.
I see signs of a downturn but my partners want to hold the real estate forever and not sell. The housing market in Florida had collapsed and the residential housing market was getting weaker around the country.
I personally stopped investing in any new projects in 2006. We were in commercial real estate so demand was still decent in 2007 and early 2008.
Once Lehman failed in Sept of 2008, virtually all bank lending stopped and virtually all real estate values went into a free fall. My $12 million in equity in real estate evaporated in weeks and we were left owing more than the properties were worth and there were no buyers anywhere. My net worth went to negative and my wife’s was about $500,000 at that time.
Our entire net worth today was developed from that $500,000 in early 2009. I started aggressively trading stocks to generate cash flow and rebuild net worth and made a million dollars in the market in 2009 and about a half million in 2010. In 2010, I joined a brokerage firm to try become a financial advisor. It was not a good fit for me.
I started buying bank owned property in 2011 with my mentor. Our focus was bank owned commercial buildings in the $1 to $4 million price range.
It was a little too much for the local investor to buy for cash and a little too small for institutional investors. We would buy a property with some vacancy for cash, fill it up, finance it to get most of our money out and then buy the next one.
We bought industrial, office and limited retail. Our ideal purchase was 2006 to 2007 construction in a good location that had financial distress. Our typical purchase was a building that had declined in value about 65 to 75 percent from peak value and we could improve it to 50 percent of peak value through leasing vacant space.
I bought my partner out taking him off all bank guarantees through refinancing the buildings in 2017 and early 2018 for $5.5 million.
Most recessions are caused by the fed raising rates and tightening. I was close to listing everything for sale in late 2018 when the fed seemed to be on non-stop path to crashing the economy. I will likely sell once the fed raises rates one more time. I would also sell if values go up substantially or if my tenants’ businesses weaken. Right now everything is pretty healthy, interest rates are reasonable and cash flow is strong.
What would you say is your greatest strength in the ESI wealth-building model (Earn, Save or Invest) and why would you say it’s tops?
Invest since I really have not earned or saved since 1996 other than some W2 pay when I had the consulting firm and $50,000 in W2 pay when I tried being an investment advisor at a large firm for a year in 2010.
What road bumps did you face along the way to becoming a millionaire and how did you handle them?
Many, the road bumps were my greatest learning experiences and I would not trade them for anything. I also don’t want to repeat them.
We really did not have many road bumps to saving our first million and had great career experiences.
Going from $1 to over $10 million net worth was fast with starting the right company in the right industry at the right time.
Going back down from over $10 million net worth to around $3 was incredibly quick. With investing you usually take the escalator up and the elevator down. The loss in net worth really did not impact our lives very much. We spent a little less on vacations.
The 2008 downturn and losing $12 million in net worth and dropping back under a million was a far greater adjustment. I think it made me a much better person to have gone through the experience. You rely on God and others instead of yourself.
It’s not a pleasurable experience to be golfing and going to sporting events with your bankers one day and then having to share the facts that you can’t repay them and things are only getting worse.
My education and financial abilities allowed me to focus my efforts on spending mornings studying stocks and investing and afternoons meeting with bankers and working through issues. It genuinely was an amazing time frame to see God generously provide for our family and it was far more enjoyable working with the bankers through incredible challenges than I ever would have imagined.
What are you currently doing to maintain/grow your net worth?
- Paying down debt to increase real estate equity value
- Managing properties to increase cash flow
- Investing in the stock market
- Investing in real estate development in Florida
Do you have a target net worth you are trying to attain?
Since about 2000, my target was about $7 million net worth. That allows you to do pretty much anything you want other than private jet and multiple residences.
We have exceeded that but have no desire to expand our lifestyle expenses beyond the $250,000 to $300,000 range.
How old were you when you made your first million and have you had any significant behavior shifts since then?
I was 30 when the start up I was CFO for went public in 1996. We reached the million dollar level.
There were major management changes three months prior to the IPO that I did not support and I left three months after the IPO to finish my MBA and look for new opportunities.
I never worked for anyone again other than I tried being a financial advisor in 2011 that is really pretty close to self employment.
What money mistakes have you made along the way that others can learn from?
In hindsight, I learned so much from all my mistakes I don’t think I would do anything differently. If you take away someone’s mistakes you likely take away everything they need to be successful in the future.
Just imagine two 22 year old snow skiers, the more aggressive one that falls more will likely end up the better skier and the one that never falls will likely never reach their full potential.
Now imagine two 50 year olds learning to snow ski, the conservative one will likely do far better than the more aggressive one. It’s tougher to recover from falls at 50 than at 20.
I invested well but made many mistakes along the way.
I have made so many mistakes costing tens of millions of dollars. My single largest mistake was selling a million shares of GGP stock for $.44 a share in 2009 based upon the advice of others rather than relying on my own analysis. That stock has gone up to over $30 million dollars today.
If you google the number one stock from 2009, it was GGP and I had bought a million shares of it and sold them for a modest gain at $.44 a share instead of holding. I spent months driving around going to GGP malls, studying financial reports, analyzing their debt, and relied on the advice of a couple well known individuals in that industry rather than my own research.
I made a mistake not selling my real estate. I made a mistake not selling IT firm for cash. I made a mistake going into 2008 with way too much debt. I made a mistake thinking there was going to be hyper inflation in 2012 and was not invested in the right stocks.
The goal is learn from your mistakes and don’t repeat them.
What advice do you have for ESI Money readers on how to become wealthy?
The most important thing is to marry well and always spend less than you make.
My greatest strength as an investor is I love buying stuff on sale.
2009 and 2010 were amazing years for me in the stock market.
2011 to 2015 had incredible opportunities to buy bank owned foreclosed real estate.
The opportunities in residential land development in Florida are very good now.
The timing to build a IT consulting firm in 1999 was incredible.
I am very good at identifying rising tides and investing my time and efforts there. I need to improve on being 100 percent out when the tide goes out but I think I am getting better, only time will tell.
FUTURE
What are your plans for the future regarding lifestyle?
I love what I am doing at the current time.
We will travel more when our youngest starts college.
What are your retirement plans?
I love what I do with analyzing and investing in new real estate projects.
I would love to be a small part of a start up company in the future in an advisory/modest investment role.
Are there any issues in retirement that concern you? If so, how are you planning to address them?
Health. I am trying to lose weight, eat better, and work out more.
I love our Medishare Christian health cost sharing ministry and am very comfortable that that coverage will be adequate and affordable for our needs until we have Medicare.
We want to raise our daughters to always save and live within their means but enjoy that life within their means to the maximum.
MISCELLANEOUS
How did you learn about finances and at what age did it ‘click’?
I learned from my dad how to invest in stocks at about 12. My dad was always very open about how much they made and how they saved their money.
He retired at 52 from ATT and was a college professor for a few years after that.
Who inspired you to excel in life? Who are your heroes?
My dad and I had an absolutely amazing mentor starting from when I was 27.
Unfortunately my dad has passed away a couple years ago but I speak to my mentor regularly and generally follow his advice.
Do you have any favorite money books you like/recommend? If so, can you share with us your top three and why you like them?
- Principles: Life and Work
by Ray Dalio - Poor Charlie’s Almanack: The Wit and Wisdom of Charles T. Munger, Expanded Third Edition Charlie Munger
- Warren Buffett annual letters available on Berkshire website
- Any books about Warren Buffett
by Ray Dalio
Charlie MungerDalio has an amazing understanding of the financial system. His You Tube video on the economic machine is a must watch.
There is nobody better to model your financial decisions after than Warren Buffett. I wish I had his patience and discipline to wait. His investment model is actually pretty simple and easy to understand. On a quarterly basis Berkshire Hathaway under performs the S&P 500 most of the time. Over time they have exceeded the S&P 500 greatly. Warren knows how to wait to buy at value price and be very patient.
Do you give to charity? Why or why not? If you do, what percent of time/money do you give?
We tithe to our church and make other small donations.
Once debt free we will establish a donor advised fund and expand our donations
Do you plan to leave an inheritance for your heirs (how do you plan to distribute your wealth at your death)? What are your reasons behind this plan?
We plan to help our daughters with education, first house, grandkids’ education and grand kid activities.
We will spend freely on family vacations and experiences. We absolutely love spending time with our kids and their friends.
We will likely leave a limited inheritance to our kids and grand kids.
If you study the devastating impact of generational wealth it is not something we want to support in any way. It’s the third and fourth generation that really ends up relying on a trust fund rather than their own hard work.
By fifth generation they usually piss the money away and its diluted among heirs so future generations can make their own way without the negatives of relying on inherited money.
As much as I like this series…this one seems a bit “out of touch” with the “common millionaire”. Maybe I just need to set loftier goals. Still interesting…but I can’t relate.
Yeah I can sympathise a bit. This seems so far from where I am.
I love this series and I try to relate as best I can with the writers; however, when I read the net worth value on this interview I went straight to the comments section. Decided to go back and read further into the interview, but once again stopped at the annual spending value (which is higher than my family’s combined earnings) and realized this interview is not relatable… to me. Mad congratulations to this decamillionaire!!! However, moving on to next week’s interview.
I’ve read each and every Millionaire Interview since the first one (I happen to be #49) and this one was the most interesting one! I love that we finally have an active stock market trader who has been successful at it. Everyone else are passive index investors, which is boring to read about.
I love that you purchased that $1-4 million commercial R.E. That was very astute investing. Like you I am an active trader in the markets. I so invest a sizable portion of my net worth in commercial real estate (thru a different route, I cherry-pick individual, syndicated R. E. Crowdfunding deals).
The only observation I want to comment on; you have a substantial net worth and income. You have enough to live very comfortably, extravagantly actually. Why not sell some of your real estate NOW, while FED is dovish and back to lowering rates, reduce debt and cut your stock trading by half. Why? To reduce stress. We are the same age (you’re one year older than me) and I am very proactive in reducing stress and avoiding any stresses in my life, Ben if they be people.
MrFireby2023,
Always love your comments here and I miss your blog!
Thanks John. With a concern about privacy I decided to close the blog down (I am on NO social media either!). Privacy is sacred and if I can reduce my digital footprint, it’s something I mist do.
Thanks again!
MrFireby2023
Mr. Fireby,
I appreciated your comments. I would define myself more as an occasionally active bargain hunter in stocks or real estate than an active stock market investor. This year has actually been a challenging year for me to invest in the stock market and I made a couple bad timing decisions and am down for this year. I do best when markets are selling off and a lot of quality companies are selling at substantial discounts. It seems almost all asset classes are priced fairly high right now, at least to me.
Your comments on selling some assets and reducing/eliminating debt is an area I consider every single day. I was close to selling everything last December when Fed was on stop stop increases. Now the trend is down and if you look at US ten year rates compared to Germany, Italy, Japan, UK, etc, we are actually really high at 2 percent ten year rates. If I could sell with modest commissions and minimal tax impact I would absolutely sell everything today. If you consider a $1 million dollar real estate asset that generates $70,000 a year NOI with a cost of $700,000, accumulated depreciation of $200,000, and 4.5% debt of $700,000. A sale would trigger likely 7 percent all in selling costs, depreciation recapture of $200,000 so another $80,000 in taxes and long term gains of $230,000 so another $55,000 in taxes. The net after tax proceeds would be $1,000,000 less debt $700,000 less selling costs $70,000, less taxes of $135,000 so you only net $95,000 after all taxes and expenses. If the building generates $70,000 less interest cost of $31,500. It is a return of $38,500 or 40% of your $95,000 potential after tax sale proceeds not counting any appreciation or deprecation. The numbers are why I don’t sell. I absolutely could do a 1031 trade but I like what I own rather than finding another real estate investment to trade into.
Once I see likely depreciation in real estate values I will sell, I just don’t see it right now with rates as low as they are and unlikely to increase in the next 12 months.
I don’t have much stress from my real estate and would likely have far more stress with trying to figure out where to invest cash today that was safe from a downturn. Our odds of a future downturn are 100 percent but I like real estate for at least the next few months and likely few years. Once we know who the next president is likely to be, it might change everything and require selling to trigger paying all taxes at today’s income tax rates.
Thanks for sharing —- although it’s a much different approach than I took (my approach was slow and steady) —- few ups and downs!
As for you, that was simply part of your plan —- more downs than ups, but your ups payed out nicely over time, and the downs were part of the process for you.
It’s interesting for me to learn from someone who took a much different route —- all while keeping your eye on God, your family and your fun/work/experiences—- good for you, although I don’t know you, I’m very proud of you.
Risk-taking and excitement in the work space happened for you —- I fear too many people (including me) settle in for the safer journey in life. Again, good for you !!!!!
Carry on and glad you mentioned becoming debt free —- I’m working on that feature too. Before I retire in less than 18 months, I plan to be completely debt free ——
Good luck in all you do in the future —- would love to meet you someday —-
Razorback,
Thanks so much for your comments. My story and path are likely far more relevant for someone younger considering their career path options. If you financially have nothing at the start of your career your financial downside from where you are is zero.
For someone approaching retirement, the most relevant info is don’t follow the crowd and sell when everyone else is selling. It’s the simple, be greedy when others are fearful and fearful when others are greedy. We are much closer to times of greed than fear in most asset classes right now.
Congratulations on your upcoming retirement.
What do you plan to do with your time and investments in retirement?
Would love to meet you as well.
[email protected]
Shoot me your contact info and I’ll reach out to you. Thanks.
Thank you for sharing, I found this interview, complex and well laid out. I am a future millionaire interview and the insights at a higher level are invaluable.
Maybe you need to start a new interview series for decamillionaires, because I’m 52 with a net worth of $2 million achieved solely through saving salaries and bonuses and minor real estate investments, and I can’t relate to someone who talks about how they were losing out on $10s of millions from poor decisions in their early 40s. Totally not relevant for the vast majority of your readers.
“Totally not relevant for the vast majority of your readers.”
What about the minority of readers who it could be relevant? Is it too much to ask for 3 out of 139 interviews for them?
Perhaps seen as irrelevant to some, but I see it as both fascinating and inspiring! This is a guy who’s had to reinvent himself / start from scratch (or close enough to it, on relative levels) multiple times. Awesome!
While I’m nowhere near the level of MI-139, I know quite a number of people who have very similar real estate stories and are at or above this level. I would love to see more people like this represented in these interviews.
Its not too bad to read something out of touch and pick up some insight from their story. I agree with it not being very relatable but also not uninteresting. Good read!
Agree, it is inspiring. I am no where near a decamillionaire but could still relate to the story. Accounting degree from a public university in the Midwest describes me too. I think having all the millionaire interviews have a net worth of $2M to $3M would be boring. Great read.
As a 39 yr old with ~$2M net-worth built over the last 7 years I found this interview extremely valuable. I can 100% relate to using a mixed approach to building wealth from real estate investing, building and selling a business, along with working for various firms with equity and bonus etc . What was most useful to me was MI-139s experience with economic cycles which helps me build a plan of action along with his ability to be productive and feel accomplished without an employer. Also appreciate the faith of MI-139 and use of Faith Ministries in place of insurance, will definitively consider for my family in the future.
While I can appreciate comments from some readers that this interview is hard to relate to coming from someone who is “Super FI” I still think it has a lot of merits. Out of 139 interviews in this series, I believe we have had only 3 deca-millionaires interviewed so it is nice to throw in one of these every now and then.
I think it is inspiring to read of someone who at 30 abandoned the corporate life and went out on his own and achieved so much financially. I also appreciate the honesty and openness of discussing the “failures” that cost him millions, “I have easily lost $40 or $50 million dollars of equity and cash, maybe more.” Winning as big as MI-139 requires a lot of risk-taking and a strong constitution to get up off the mat when things don’t go as planned. This is an important lesson in life for anyone attempting to achieve FI. Success is a road paved by many failures along the way.
Love the focus on Faith and maintaining the right priorities in life. I would not want to live in this world without my faith to fall back on. Life is difficult enough and almost too much to handle on your own.
And I will forgive MI-139 for sending a daughter to South Carolina. No one’s perfect 😉
As someone who has read every millionaire interview (and was Millionaire 73) I really enjoyed this and to see the wealth gained/lost/regained and the repeated mention of learning from mistakes was very impressive. Since I am in the enterprise software space since 1998 I am familiar with the consulting firm you started as well.
“Escalator up and the elevator down” was and excellent and very true quote + the skiing at 20 vs 50 was spot on as well.
Thanks again for sharing!
Millionaire 73
https://esimoney.com/millionaire-interview-73/
Excellent story. Although some may feel this doesn’t relate, there is so much information & advice regarding mindset and execution that is valuable to all walks of life regardless of how you earn and invest. This is the kind of person I’d much rather take to lunch or have a call with and learn from than someone who might be considered the more “common millionaire.” Way to go!
What a fantastic read! It’s so refreshing to hear a different take on FI. While discipline seems to be the #1 focus of many of these interviews; this is a good reminder of how leverage can be used as an accelerator.
I’d love to hear more about how you found your mentor and what that relationship was like. (“My dad and I had an absolutely amazing mentor starting from when I was 27.”)
If I had everything to do over, I would likely try to skip any path that included leverage.
I enjoy the financial challenge of leverage. I have learned so much from different bankers/lenders. The amplified returns are really fun when it’s going well.
The downside of an asset that is levered and declining in value is exceptionally challenging.
Overall a levered path is not one I would recommend for most.
I found my mentor from work. I was 27 and CFO for a start up and he was about 50 and the CEO. His background was accounting and being a CFO so we had a lot in common. His advice was invaluable in so many ways over the last 27 years and we were financial partners in 2011 to 2017 on buying real estate.
Phenomenal Interview! Left me spellbound! Made one realize the possibilities are endless and great to hear the writer owning his mistakes and sharing startup experiences.
A good read for some of the overconfident ESI experts who cross $2Million net-worth and start picking up faults in others.
M-139. Very interesting story. Lots of lessons to be learned from your story: importance of a solid education, marrying well, grit, perseverance, humility, wins, losses, and above all, steely focus on God and family.
Also, looking at expense compared to income, living “well below” your means. Nothing wrong with being Uber successful. There’s a place for it. I love and envy your strong drive, and your desire to be successful. Most fascinating to me especially, is the enormous growth of your wife’s Roth IRA account. Incredible!
Can you shed more light on anything you guys did to drive such explosive growth? Or maybe it was simply being in the right mix of funds and you guys simply and patiently “buffeted” it. Regardless, very impressive, and I am very grateful for your write up. Best of luck derisking, and enjoying your money whichever way u chose to spend it. Well earned.
Razorback,
Thanks so much for your comments. My story and path are likely far more relevant for someone younger considering their career path options. If you financially have nothing at the start of your career your financial downside from where you are is zero.
For someone approaching retirement, the most relevant info is don’t follow the crowd and sell when everyone else is selling. It’s the simple, be greedy when others are fearful and fearful when others are greedy. We are much closer to times of greed than fear in most asset classes right now.
Congratulations on your upcoming retirement.
What do you plan to do with your time and investments in retirement?
Would love to meet you as well.
M139,
I loved this interview. Thanks for sharing your fascinating ups and downs and advice. Congrats on your phenomenal success and kudos for your ‘never say die’ spirit.
Dean J,
Sorry last reply copied by mistake. My tech skills in 50’s are far less than when I was younger.
Wife’s IRA was fairly straight forward. For the early years the entire key is saving money and not losing much on investing. You need to start early with saving to give compounding a chance to work over years. The account went up from $35,000 to $40,000 investment to $144,000 from about 1990 to 2008, so a pretty typical market return. In 2008, everything was on sale in the stock market and I focused on some lower priced stocks of levered companies. The $144,000 to $1.6 million was achievable through bargain hunting on the most beat up stocks that had a pretty decent business outlook.
I hope we never see as big of market sell off as we did in 2008 again. When quality companies go on sale, it’s a great time to buy.
I don’t buy any funds but invest in individual stocks. The greatest bargains I have found are in stocks trading under $5 a share that will bounce back above $5 a share. Many funds sell anything that drops below $5 price regardless of business fundamentals. Anything dropping today below $5 is likely dropping for a reason so likely not a great buy. When all stocks are dropping many of the best opportunities are individual stocks below $5 a share that are being sold in mass.
My recommendation for anyone is today’s market is to accumulate savings, be careful, invest defensively, and try to not to lose much in next upcoming downturn.
Very inspiring interview – thank you for sharing! For me it was relatable on the IRA returns piece. I have been waiting to see an interview with someone who was able to build wealth above market returns by sticking to a strategy that makes sense to them. You guys are about a dozen years ahead of me, but in the next 10-12 years if I’m able to continue to getting returns in the 30%+ range, as I have in the past 8 years, I should have $8-10MM in a Roth and a similar amount in my mom’s IRA that I manage & that I’ll inherit one day. I don’t do individual stocks, mainly triple leveraged etf’s for me, but I enjoyed the different perspective, strategy and wisdom.
Roth Guy,
What triples do you buy and how do you control downside risk?
If you take a look at chart for five and ten year returns on DUST and NUGT, the triple etf gold miners. Even though they are the opposite side of the same trade it shows the long term returns of volatile triple etfs that both trend towards 0. As an example a 10 percent increase equals a 30 percent up in the triple and a 10 percent decrease is the 30 percent decrease. Starting at 100, up 10 times three is 130. Down 10 times 3 is 91 for a net 9 percent loss. Same starting at 100 and down 10 times 3 and then up ten times three is 100 down to 70 up to 91. Both started at 100 and the base index went up 10 and down 10 the triple etf holders each lost 9 percent.
I do short term trade triple etfs sometimes and in the right market they are an amazing tool. In an up and down market they can financially destroy a portfolio as you can see in the charts of DUST and NUGT.
I think it’s because of how the daily rebalancing works that means you buy more and more as the index increases and sell more and more as the index decreases so you end up buying high and selling low on anything with volatility.
In a market on a smooth steady uptrend (or downtrend if you are short) they are an absolutely amazing investment but incredibly dangerous and a guaranteed money loser in an up and down market in my opinion/experience.
In a volatile market I try to focus on more small wins – and I’ll sell after a day or two if I make 3 or 4% on the trade and just do that a couple times a month. Unless I feel the index is at a low point and has a good shot at picking up 20 – 30% in the timeframe of a few months – then I’ll press my luck a little more. It’s certainly not a perfect science. But I don’t stay in a given position for more than 5 or 6 months typically – they are not conducive to a long term buy and hold strategy (which I employ in my 401k…and this is kind of my back up plan. If I totally screw up my Roth, I should have $2M in there by the time I’m 60). I keep an eye on about 20 – 30 different triples, and they are mainly tracking the US or other countries main indices. A few are SDOW, UDOW, SQQQ, TQQQ, YINN and YANG. I’m a little more hesitant now to play around with BRZU and RUSS, they are very volatile, but have thrown of some very nice returns in the past (they also have plummeted 40%, which is no fun). With the market as high as it is now, I’m drawn to inverse etf’s and am sitting in those until the next ~10% drop or so in Nasdaq/Dow.
I love your strategy of quicker modest gains and will research some of the names you trade in. Thanks for sharing
This was a very good interview. Appreciate when interviewees provide lots of detail, as not everyone is familiar with all the investment opportunities out there. I don’t know a lot about real estate or IPO’s, so appreciated learning something new.
As far as the people complaining that this interview isn’t relatable: You are making the exact same argument a poor person would make if you suggested they read any “relatable” millionaire interviews on this site. To them a million dollars seems unattainable, and that’s exactly the reason they will never become millionaires.
Instead of posting comments about how you can’t relate, maybe reread the interview and try to learn something that can help you duplicate M139’s success.
P.S. love to see wealthy people donating to the less fortunate.
Wow. I found this interview very relevant. As some of the recent interviews show people just getting above the 1MM level. This shows what you can do to move further ahead. Use the money to control more your destiny. Yes maybe the level seems high. If you remove the some of the job timing luck. Look at how it was built up. I love the projects M139 is currently involved in.
Isn’t one of the big points here how, M139 can get into some very interesting project. I can only imagine how many calls your getting from local commercial brokers. When my stock investment portfolio got over 1MM and I moved to investment real estate to diversify. I never thought about commercial real estate. I though it was not possible. Then, I was able to get into Commercial. And to be honest I like commercial a lot better. I love seeing my commercial tenants succeed. I enjoy just going there to check on the properties. (Yes I like to check on my investment and tenants. It reduces surprises.) The risks are bigger, the expenses are bigger, but so is the free cash flow and the returns are higher then residential.
I keep thinking I should sell my single family portfolio which is just under 1MM and move that money into my commercial real estate to bring down debt. But then I think I want to be equality diversified between Stocks, cash, residential real estate and commercial real estate. Commercial is now the largest portion part of my portfolio. I seem to be handling way more residential tenant issues lately then commercial. What are your thoughts? Are you using a management company for basic repairs? I still manage everything myself because I don’t want to pay for that service.
For the 18MM in commercial debt notes. What are the terms, are you getting 10 year notes. Locally I cannot seem to get more 5-7 years on my Commercial. While my basic real estate I’m locked into 30 years.
Is 1MM in cash your normal position? Or is this your stock trading cash? I have started holding a lot more cash in the last year to be able to get into big deals. But I also hate the fact the money is not making any real interest.
I was never lucky enough to have a mentor. I can’t say I learned the hard way. It just took longer to get into everything. What keeps you from selling a ton of the real estate and living on the interest. Is it more to keep you busy or are you having fun with the real estate.
Rob,
My loan terms are generally 5 years fixed interest rate and right around 4 percent now from the large banks and 5 percent from local banks. I have used CMBS long term financing with 10 and 20 year fixed rates in the past. The 30 year rates you get on residential are unbeatable compared to commercial.
I don’t get very many calls from brokers and typically am buying assets other buyers don’t want like vacant big box space. It’s an interesting process but I look for properties I can tenant fairly easily at decent rental rates compared to my purchase price.
The best returns are from buying vacant and filling up with tenants or developing from ground up. The absolute worst is buying occupied and selling vacant.
The $1 m cash is mostly in operating accounts and used for cash reserves and new projects. Banks like seeing some liquidity on your balance sheet.
I have a great management company that handles all phone calls and day to day issues. I hire local brokers for leasing. I generally handle tenant relations for my largest tenants myself since I enjoy it and it’s easier to keep a tenant than find a new tenant.
Taxes on selling and low returns on cash investment are the reasons I keep real estate for now. I also enjoy my tenants, management company and buildings. It genuinely is fun for me.
I think you have a perfect blend if you have quality residential real estate, commercial real estate, and stock investments. Ideally a job or pension as well. A three legged stool is much stronger than one with two legs or even one.
Rob, I’m curious, what kind of cash-on-cash returns are you getting on your commercial properties vs. the residential properties? Are there other factors that make the commercial real estate more attractive than residential in your mind (like appreciation, etc.)?
M192,
My goal is to refinance my initial investment out as quickly as possible. That than leads to infinite return on cash invested but it’s not without risk because of the debt. I have never invested in a residential for rent property. I wish I would have invested in single or multi family in Scottsdale, Vegas and Florida in the downturn and I looked at all three but never pulled the trigger. Commercial is easier to find value add vacant. Vacant commercial is worth so much less than occupied commercial. Vacant or occupied residential is valued close to the same. I personally prefer a building with financial distress rather than one that needs a lot of repair work. For a while in the downturn you could buy 5 year old buildings that were like new but vacant. You could have done the same in residential in some markets. The residential I do now is land development to sell or new home development to sell. I do have a 12 unit mixed use building that will start this summer and I am always evaluating brand new single family homes for rent model. Industrial is still the best asset class in my mind but I have not done ground up development only bought existing. The best value add is vacant retail right now. I am working on buying a vacant 192,000 mall anchor vacant Sears now at $16 a square foot. A $2 NNN lease rate is a 12.5 percent cap rate that is impossible to find in other asset classes.
I think appreciation can be better in residential in the right markets but values are really high right now in many markets
Can you talk a little bit more about “I joined a local real estate development group and funded my share of equity as a part time partner overseeing finance and banking.”? Did you have any RE experience beforehand? Why real estate instead of another IT focused firm (if this has to do with “rising tides”, what do you look for when trying to identify the next wave and if you were starting out today in the current economic environment would you still aggressively pursue RE?)? How did you identify the RE development group opportunity and what did you bring to the table to get a foot in? Was the CFO role or the MBA highly leveraged in that transition?
I’ve been working in a capital markets / corporate finance capacity for large corporates for almost 10 years (just turned 32) and am quickly realizing that income increases will result more from longevity and less from incremental value while working for a large company. I’m assessing whether an MBA would be a good addition to help me transition into a more specialized field where value and income are more highly correlated (interested in RE but want to get some experience/exposure from experts before pursuing independently or with JV). With the ultimate goal of working for myself or small firm without the large corporate politics, I continue to save aggressively, purchase a mix of cashflowing (>4%) low beta assets, typically buying SPY futures on the dips for leverage, with the intention of using the next major downturn to solidify my nestegg.
Thanks for your thoughts.
nickjc
I met the primary partner in the local real estate development company when they did a build to suit renovation for the company I was the CFO for. I got to know him fairly well during the process. One night while put to dinner with my wife I ran into him at a Max and Irma’s restaurant and he was seeking a few hundred thousand dollar investment in a new real estate project. I analyzed the investment and liked it and lent the money and got 20% of the equity upside. Through that deal I made some financing and equity suggestions and ended up as an equity partner in future deals. My role was finance so my background as cfo and mba was helpful.
In 1999 and 2000, I was both in IT and real estate. After the IT bust, real estate seemed like the better opportunity to me. I have always thought about going back into IT and tried a couple small companies that did not work out.
Rising tides are fairly easy to identify if you look around you and look for people that really are not that smart and seem to be making a lot of money. I personally don’t like the pot business but the tide is definitely rising there for now. Residential land development in Florida is a growing market/rising tide due to 7,000 people a day moving to the state. Lower interest rates has a rising tide impact on some companies. Real estate is not that great of market today and I am closer to being a seller than a buyer.
For your own career choices look for an opportunity that you have an equity upside in the company you work for. Pre-IPO is optimal.
MBA is likely a good investment to pursue part time. It’s tougher to make the numbers work if you quit an $80,000 plus a year job to pursue it.
Thank you for the background. Great advice and much appreciated.
Hi M139,
Your interview is by far my favorite so far, well done.
I am 36 and I would appreciate your comment to some questions:
-During the GFC years obtaining finance was tough. How did you finance your Real Estate, was that difficult?
-Your portfolio is heavy on Real Estate but a good portion of the interview discusses stocks. Is your (comparatively small) allocation to stocks intentional, is it due to leverage or liquidity?
-You appear to be able to service your debts and pay down the principal amount also. Can you give some insight into that in terms of strategy?
Regards,
Moe
Moe,
During the downturn my mentor was also my business partner in real estate and he had decent amount of cash on hand and $25 million net worth so we could buy for cash and get financing post purchase. We had a major advantage with being able to buy $1 to $5 million dollar properties for cash and get attractive bank financing rates once fully leased.
My ideal mix of stocks and real estate is likely 50%/50%. I found some opportunities in real estate that caused that mix to go closer to 90% real estate but it’s trending back down.
Most commercial property debt is underwritten at a 1.25 to 1.4 debt service coverage. As an example a $1 million dollar building that cost $700,000 and is generating $70,000 NOI will support a debt payment at 1.4 of $70,000 divided by 1.4 or $50,000. At 4.5% interest and 25 year amortization that is a debt constant of 6.67% divided by $50,000 is $750,000 of debt load with annual interest of $33,750 and principal of $16,250. Let me know if that makes sense and if not I can try to explain differently. A $750,000 loan on a $700,000acquistion price means a negative $50,000 investment that returns $20,000 cash flow and additional principal pay down of $16,250.
The hard part is finding the building to buy for $700,000 that generates $70,000 in NOI and is worth $1 million that a bank wants to lend $750,00 on. That is really the value add of what I do.
Probably the highest NW numbers i have seen in these interviews, impressive.
Curious if you can share some of the “devastating impact of generational wealth” you mentioned. I suspect you may be expsosed to this and have some first hand observations on this topic more than some of the average readers. I am MI-94 and a first in my family to hit this level. I now have the concern of how to not ruin my kids. Curious if you have any insight into this topic. Are you kids aware of your wealth? Are they aware they are not getting it later?
This is my biggest worry. My wife an I both grew up with little and we were hungry to do better. It motivated us to have great careers and work very hard all of our lives. I am so worried I am going to mess up my kids.
I knew there was nobody that would give me anything, they know we do well. I talk about it all the time with them but they are young I don’t think they get it yet.
GT
They will get it over time and you will also understand their individual strengths, gifts and weaknesses over time and can adjust accordingly.
Just listened to an interview with Ricky Gervais this week, when asked what most contributed to his success in life he replied “being poor”. Being poor all the way up to age 40 he says was what gave him the drive to succeed. What a conundrum! how do you pass on to your kids the drive that comes from poverty/wanting to your kids, when you live a pretty comfortable life?!! I thought it was an interesting comment by him.
Mi 94,
There is nothing wrong with you living a comfortable life, it’s what you earned and saved for. The challenge is not allowing your future generations to live a comfortable life without needing to work because of how much you earned, saved and invested. You truly would not be helping them.
I am also a future beneficiary of half my mom’s $2 to $3 million estate and firmly believe that half to my sister and half to my family is the right distribution. My sister genuinely needs it for her future retirement. Ideally my mom would spend it on things she enjoys now but her life is pretty simple with playing cards and time with family and friends. Her pension and social security income exceed all her possible expenses. At a certain age world or US travel loses its appeal, especially after you lose your spouse or have some health issues.
Mi94,
My kids are aware of it but we really just lead a pretty normal upper middle class life and take nicer vacations than most but we fly southwest and have never flown first class. Most of our friends are from church or the lake house and it’s firefighters, police, our pastor, insurance broker, optometrist, etc. Neither my wife or I grew up with an abundance or a lack of money but middle to upper middle class. My dad did fairly well as an engineer and retired early.
My observations from inherited money or trust fund kids comes from people I have come across over the years. You see some of it in real estate. My kids have grown up seeing and experiencing the financial ups and downs of our family and are all excellent students with really good work ethic. The kids that are raised by parents that rely on a trust fund or unearned money is really the generation that I have never seen much good come from. Many times, instead of focusing on being productive they focus on how to access their trust accounts. Realistically our kids won’t get an inheritance until they are in their 50’s or 60’s, maybe later with health care advances. That is also another 30 or 40 years of compounding growth for the bulk of our net worth. 7% return compounded over 35 years is a 10 x return on investment so $10 million can go to $100 million over 35 years. Those are numbers that can screw up future generations since the trust balance would still be increasing every year even after taking substantial withdrawals. It will be really interesting to see how much we donate vs pass down to our kids. It would be nice to cover future generations education costs and maybe something towards a first house. Your likely issue is not ruining your kids unless for some reason you and your wife pass away at an early age. The biggest risk is accumulating so much it ruins work ethic for your grand kids and great grand kids. Just my opinion from a pretty limited observation. I don’t know anyone really well that has a substantial trust fund.
Thanks for the reply. What you say rings true! It is a tricky balance. Of course we hope to live a good long life and hopefully manage our money well after our kids reach adulthood, but we did set up a living trust/will in the event of an untimely passing. Our instructions says the trustee will provide enough to get the kids an education and start a career, but not more until age 40. Hopefully by then they have have learned the value of a buck, how to manage it, and gained the self worth that comes with earning your own way. It seems counter-intuitive to those without money, but giving kids stuff and making their life easy in the end does more harm than good!
Good for your keeping your life grounded and normal even with your substantial means to do otherwise.
Fantastic interview! This interview is, in a lot of ways, just like the game of monopoly… leverage can allow you to win big or lose big. There are not many people that can bounce back from all those loses. But this shows that persistence pays off. Not everyone can relate to being a deca-millionaire but think about all the people that lost everything in the last down turn only to never invest or own again. FI grit, I loved it!
Man this interview is without a doubt the best in the series, had a huge visceral impact on me. How do I put this, It’s one thing to be peripherally aware of people much more successful than you, it’s quite another to be presented with a real example in full detail, No tricks or gimmicks, just unvarnished success. I have to say as a millionaire myself this one had an impact on my ego. In a good way, I needed the humbling.
For those of you dismissing this as not relevant to your own circumstances, I’d recommend taking a s second and third look and ask yourself why. For me, my immediate rejection was all ego driven. No I will not (cannot) follow MI139’s path, but it serves as an example of what is truly possible. MI139 became a multi-millionaire 3 different times and in 3 different arenas (IT, Commercial RE, and Equities). A virtuoso performance.
Hat’s off to you MI139
Scott
Totally agree with this comment! Can’t get over this story all week! Just goes on to show the magnitude of opportunities that are around us and that there is so much more to accomplish!
MI 139- Would love to meet you and ask questions in person if there is ever an opportunity. I’m 32 and on an FI path!
Scott,
Thanks for your comments. Actually the boom to bust to boom again multiple times especially when leverage is involved is pretty common.
The path to from 0 to millionaire with a decent job and disciplined spending and investing is pretty achievable, the biggest question is how many years it will take.
The path from 0 to deca millionaire in a reasonably short time frame takes extraordinary returns on equity invested or ownership/stock options in a company that experiences significant growth and stock appreciation.
What I did in three industries was basically the same thing with investing aggressively when there were opportunities for very good returns on equity invested.
It was the oddest thing in 2008 when no one wanted to buy a home, rental properties or stocks even though the year or two before everyone wanted the same things when they were very expensive.
The IT company was started when IT companies were very valuable to sell and fairly inexpensive to start. The metric my partner and I tracked more than others was value per billable consultant. A consultant would bill for about $175 an hour or about $300,000 a year and your profit margin before taxes was about 20%. Private consulting firms were valued about $300,000 per consultant and publicly traded ones were valued about $500,000 to $600,000 per consultant. The more small companies a publicly traded consulting firm acquired the higher their stock price went up in 1999. I rarely ever met our clients and never was on a project myself but I had a partner that did those tasks.
My time was primarily spent recruiting new consultants that were being referred to the company from our existing consultants. It was a crazy good return on equity when you could spend thousands hiring someone and it added hundreds of thousands of equity value. Our only mistake was pursuing our own IPO with another company rather than taking a cash offer from an existing company. Once the stock market started dropping in March of 2000, we should have sold immediately for cash. Within a year of the start of the drop many of the consulting firms that were previously buying small firms were worthless. It was due to the sharp drop off in demand for IT services after y2k came and went. In hindsight, the downturn is pretty predictable and obvious.
In real estate development in 2002 to 2006, you could build neighborhood retail centers or Walgreens and easily have a million dollars plus profit per building. Once the building was completed and full you could have all your equity back out of the project so your return on equity invested was infinite.
Once bank financing dried up in fall 2008, all building values fell below cost and it was impossible to find new tenants for buildings under construction. Land values fell 80 percent and retail centers fell 50 percent plus. During the boom times many new developers entered the market and the downturn financially destroyed virtually every developer within a one year time frame.
When you focus your efforts on areas with the greatest returns on equity it often times attracts too much money and the opportunity is destroyed.
The opportunities after the stock market crashed in 2008 were really interesting. One company macerich was paying a 50% dividend yield and the CEO was talking on investor calls that business was slowing but still ok and the dividend was safe from being cut. The stock had dropped from $65 on sept 12, 2008 to under $6 on March 27, 2009 and the dividend was the same $3 a share. The stock price by the end of 2009 was back up over $37 a share. Google the stock price for MAC and look at what it did in 2008 and 2009. Those opportunities are really rare but they do occur in different areas at different times. During the 2008 downturn you could buy nice newer rental houses in Las Vegas for $100,000 that rented for $2,000 a month and the demand and rental rates never dropped. The home values did jump back up.
Right now I am investing in buying land in central Florida to sell to home builders to build homes on. Anyone with insight or thoughts on how long the trend of people moving to Florida will last and what will change it, a comment would greatly appreciated.
The stock I like best right now is US Bank, their return on equity is 14% and its trading at 1.84 times book value. Their earnings are not nearly as dependent upon interest rate spread as other banks if you study what makes up their earnings. They are also a very shareholder friendly company with returning earnings via dividends and share repurchases. I also like BRK. I am not buying either right now since it seems we might have a stock market correction coming sometime soon but I am not selling either.
Great post M139! Very impressive!
Quick question how are you managing your land investments in Florida if you located up north? Did you just contact local florida brokers, contractors, etc?
All the best!
I have a local partner that has developed over 20,000 lots in central Florida
Naman,
Would love to talk or meet in person. Feel free to send esimonay to forward your contact info and I will reach out to you. Thanks for the comment
Hi there,
Thank you for your story. Great read and great information. Very helpful. One of my favorite interviews here as well. Would love to connect or meet in person to learn/ask a few questions about leverage and RE. I am in my mid 30s. Hopefully I can be of help as well. My email is [email protected]
Look forward. Thank you in advance.
This was an incredible read, thank you for sharing! I’ve been behind on my blog posts and just finished this one which might be my favorite millionaire interview in the series. I’m really interested, among other things in your interview, your comment saying that if you had to do it all over again you’d try to skip the levered paths. I’m in my early 30’s, living in Chicago, and feel like my income and balance sheet (150k+/~500k) are now at a place where I WANT to start using leverage. Currently debt-free and renting so NW is all assets, no major liabilities such as a mortgage. I’d love to talk more about this with you, either in person since it sounds like you live around Chicago, or over email. If you’re open to an introduction I can reach out to ESI to connect us! Thanks again for taking the time to share your story!
Please reach out to ESI to connect. Would love to meet and I can likely give you pretty good idea of my analysis of pros and cons of leverage.
Thanks for this awesome interview,
I look forward to other interviews with decamilionaires. Does anyone know which interview nr the other decamillionaires had?
greetings pete
Millionaire 18 had $12 million.
Millionaire 27 had 9 million (almost there).
Millionaire 73 had 8 million.
Millionaires 46, 47, 56, 61, 77, and 90 all had around 6 million.
Just a small update as has been a good 15 months since my interview and crossed 10M (10.1M to be exact) this month. 1.25M was stock market gains and 450K was additional savings. Feel very blessed (and lucky)
https://esimoney.com/millionaire-interview-73/
That’s a great run! Congrats!
Will your book “How I Made $1.7 Million in Just Over a Year” be out soon? 😉
Thanks for your fast reply. I love your website. Also, congatulations Millionaire73!
I could not be more polar opposite in regard to lifestyle, risks taken, especially at that level of net worth, but it’s always fascinating (or at least very interesting) to hear the thought processes and hindsight appraisal of various pathways and destinations. I ceased looking up to anyone or anything shortly after birth, which hasn’t always worked out well (lol). Nevertheless, this strange, troubling life is the only game in town, so I play, not just hoping to achieve or win. You make it happen or perish along the way. Death remains guaranteed. I mostly worry about quality of life, my loved ones, and lunch . . . that’s about it. Hold on tightly, let go lightly.
Richard,
You are absolutely right and should never look up or down on anyone based on how much money they have or make. Money and character are not the same. From my observation, if someone is not a very nice person without money, they are a magnified not very nice person once they have money. The same goes for generous people, if they are generous to others wnen they don’t have money, with money it’s most likely a magnified and more generous once they have money. From my observations, money does not change people but it definitely magnifies the good or the bad.
Everyone has different skills and absolutely should find their own path and not follow someone else’s. I think the significant benefit of the blog is learning about how others have achieved financial success and you can pick and choose from those ideas to create your own path.
Agreed . . . there’s something here for everyone. For me, the nuts and bolts behind the multi-millionaires provide great clarity without being painfully clear; we are what we are, results always mixed. I strongly believe blood, chromosomes and the environment one’s born into speak volumes for life, but they can be transcended and partially (if not largely) overcome. You see it here and there, the hunger, seventh child of a broken Catholic family or something . . . not my story. I don’t think I’d be more of a monster at the two or three million mark; a bit kinder, but more reclusive. The real eye-opener would be those sitting on millions, not sure there’s enough, still grinding, worried. That’s related to another interview, not this one. That actually makes a lot of sense, a very sobering check on some old silly dreams. Nevertheless, risky and dangerous as it’s been, I still feel pretty good. To me it’s all about the percentages i.e. cash protection, being adequately insured, on the right track, feeling more wise than oblivious. Most surprising, the realities of high net worth are no longer desirable; only the money, not what it takes. It doesn’t change the basic equation or controversies of existence. That should have been obvious, but others see and play through that very differently, so I come back for further illumination, maybe a new angle or strategy for street-level results.
As a decamillionaire, I have found it excruciatingly difficulty to explain to others how I got here. However, I have friends and neighbors with 9 figure net worth’s and about 95% of what they tell me goes above my head – however I go back and research what they tell me in depth and catch on after many hours of research. That’s what it’s about – if I can relate I’ve been there and done that and don’t really learn much. Consider that angle on “relatability” because many people make this comment here.
Also, sometimes efforts one makes at this level is (perceived to be) not worth it at a lower net worth. What if I told you I save tens or even hundreds of thousands a year clipping coupons? Sounds ridiculous? Well, my annual expenses are approaching $2M/year. Not so ridiculous.
I can’t speak for others, I do a lot of unorthodox things as a decamillionaire, even a similar market investment approach to MI139. Different from what on does with a NW that is not multiple fold FI.
I say still a lot to learn from everyone! One day some of you will become decamillionaires, the more prepared you are the faster you may get there and avoid hiccups/mistakes made by those of us who are here.
Please don’t get me wrong; I can see by my choice of words and sometimes off-tone commentary that I’m not exactly helping. Not my intent. I sincerely appreciate the brutal honesty of all these interviews, or its appearance; close enough for jazz, that’s for sure. Little to no chance that I’ll break more than a couple hundred k in retirement savings by age 67. More likely, 75 to 100k, maybe, then SS, house paid off, student loans paid off, no consumer debt. I had a zero moment at the tail end of the Great Recession. I got employed FT with perks and benefits at the last possible moment, with less than maybe 400.00 left in checking, spare change, no assets or investments or savings left, period. Ten years later, same job, different story. I’m pleased to announce my retirement plan no longer includes going out hard with a couple blood enemies, a final bid to avoid homelessness or starvation while nevertheless making some corrections. As it turns out, I’ve outlived them all, or soon will, and now have a house, minor investments, cash on hand and another good person to live for. I imagine either scenario is a little sketchy or downright unappetizing to most here; most definitely this is one of the later of the late starts, base one. But the equity grows, costs in this region are low, my 401(k) is 100% fully vested in a low-cost index fund (expense ratio is like .19, a miracle compared the other sick crap they offer). I’ve been making huge returns lately, 12 to 16%, but the full vest is just 7k; the last 401(k), cashed out a few years at around 20k, penalties and all, in a desperate bid to annihilate all the soul-sucking consumer debt that I knew would cling to me the rest of this life. There’s not an advisor alive that would recommend that, but I did it. I now have no consumer debt and a chance, age 51. About 2k in cash savings; growing. I live within my means. No kids, no new cars. No credit cards beyond the debit, cash once again king. We’ll see how it all goes; a job loss would be devastating at this delicate incubatory stage, but I’ll take this state of existence over the one 10 years ago any day of the week. Hopefully that’s encouraging to some, negative and unstable as it was, or remains, or seems. Honesty above all.
Imagining a great side hustle has been difficult; I don’t want to dog walk, deliver pizza, or cut lawns, and there’s nothing to sell or consult with beyond a bag of controversial attitudes. I did get into gardening, one of those victory types, propelled by the horrors of the Great Recession. Recently stopped buying organic fruit or produce, since I’ve now hit the surplus point. I could set up a small produce stand at some point, maybe; I’ll consider it. I spend less than $20 a week on any other groceries, and then no car payment. Those two points alone have decidedly made more aggressive investing and saving possible; it’s where the hope comes in, turning that trickle into a flow, dollar-cost averaging, also investing any raises or windfalls. Game on, kids, till the end.
Wow, who is that guy I resemble 110% (lol). Down the rabbit hole between here and there, reemerging better AND worse than before, as with most things. It started with Budgets are Sexy, on to MMI and here, then ESI articles and the MI’s most current heading backward, stopped right around here, restarted at the bottom (1st MI onward), freaked out with indignance over health insurance at one interval, also ditched MMM, took a break, reapplied myself here, now lapping back to this very water’s edge, 140 interviews and side articles behind me, somewhat in the bag. Revisiting this, still glazing over the incredible crunch of numbers, but the messaging and philosophy feel stronger than ever . . . feeling some barometric pressure regarding leverage and cash flow now, a land I may never reach. Had my chance at financing a duplex or quad many years ago, post-Recession, but where we reside now they are gone or priced out beyond access. Still, pretty happy to old school it, gaining in equity and value, meanwhile just carry on with the index investing and so on. The gf made a very interesting proposal last night, basically offering to buy me out with cash on top . . . okay princess, to become a tenant and gigolo in my own home?! Even when drinking or loosely ruminating over such an option, I think NOT, no way sugar buns, though I do respect her gears turning and the mild predation (lol). Rates to finance or refinance are cheap, at her fingertips, likewise gaining so much and more in this remarkable economy. So all the advantages are real, but I am one tough negotiator, the perfect value shopper wedded to nihilism. I’d rather see her parlay all that into the best of what I am doing investing-wise, also what I cannot readily do, as in basically securing another great deal, somewhere, preferably in this region. One and done for me, forever it seems, still plenty of extra cheddar and some wildness going on. Really nice to have a ‘vanity’ brokerage account again, for instance, playing my little horses. The 401(k) doubled within a few short months, roaring on, thanks to many heavy additions and, of course, remarkable returns. Vanguard IRA boosting the mood, job holding despite turbulence. Salivating over this severe reboot or correction, what have you, just waiting for cash to deposit at Schwab, before shopping. Game on, indeed; so easy to bank on the irrationality of others, the mother of all constants.
Sell or refinance the house, lease it back or make payments and invest the money.
Everything is on sale right now and interest rates are practically free. It’s like being a kid in a candy store.
It really is a case of evolutionary steps, isn’t it? Something you referenced earlier, peers or others, apparently ahead, concurrent, or behind you. And so miles and miles apart we are, by region, microeconomics, disposition, perhaps character or values, but under this incredible umbrella of capitalism in the first world, freely socializing, sharing, reanalyzing, in something like an open club for the financially wise and observant . . . in short, all good, babe. You’ve got your candy store, I’ve got mine, between us all the candy one could ever wish for, at potentially. I see other parallels to financial development, starting from zero in my own life. Dropout with a head injury to university graduate within six years. Used to be a black thumb, for instance, then a below-average houseplant ‘caregiver’ (lol). Longer trajectory; years passed, other things changed. Two decades out, 100% organic, multiple beds or tiered centers (five and growing), winter gardening inside and out, light gardens in the garage for starts and special cases. It didn’t even seem hard, any of it, but what a difference, eh? Give me 200 years and it’s the Hanging Gardens of Babylon outside a stone palace. Similar process on the financial front, from a completely blind dolt to some kind of faux Harvard man (lol); no one can tell me anything, still a relative caveman to someone like you. Along the way, progressing from left to right in the usual fashion, despite others willing to dispute that (lol). And so on it goes . . . I try to focus on what can be done, before all this evolution seeds out to decay. The gf stands where I was four or five years ago, at least in some ways. That deal? No deal; a new assessment recently came in. In this incredibly hot regional market, I’ve simply become too expensive for her. She did have something else in mind, actually, not what I first thought at all, somewhat ruefully. Stay away from my flippin’ candy store turned into a strange possibility, now simply moot, irrelevant, patently bad, impossible. Turned her face red, hearing the stats; just getting into the equity and leverage game myself. Still, not a matter of pride, but evolution. All of which doubles back to the incalculable value of time . . . though one can certainly crunch the numbers! All the best spent with her, I daresay.
179 MI interviews, other side articles behind me . . . ‘vanity’ stocks, my little baby horses? Blue-chip ponies now, on to stallions, perhaps, then Bucephalus (lol). Not even a dream, really, all just a matter of time.
{ Nevertheless, always some bung hole like me or someone else out there, reading all the same things, willing to say, hey man, that looks like mustard stains on an extremely new-looking $800 suit, and I don’t even like the color. They’re like, that’s vintage Grey Poupon encased in crystal on a $2K suit, motherf*cker, now go away. At which point I’m like, I don’t even like suits, man, whatever–except I love them! And money, and the idea of it, bags of gold, spanking chambermaids in the castle, etc. And so it goes, just part of the resident drama. Not saying that’s you, 139–not at all. Definitely one of the best interviews and narratives here, somewhat over my head, tagged for life and future reference. Despite embarrassing myself a little, without some kind of dream, where goes anybody? }