Today I have an update for you from a previous millionaire interview.
I’m letting three years pass from the initial interviews to the updates, so if you’ve been interviewed, I’ll be in touch. đ
This update was submitted in March.
As usual, my questions are in bold italics and their responses follow…
OVERVIEW
How old are you?
My wife and I are both 57.
We celebrated our 34th wedding anniversary this last summer.
Do you have kids?
We have three daughters:
- 20 years old — Studying to be a CPA at University of Colorado (go Coach Prime)
- 23 years old — A labor and delivery nurse at a research hospital considering travel nursing
- 26 years old — Working with me part time and working on pursuing her MBA
What area of the country do you live in (and urban or rural)?
Midwest suburban.
What was your original Millionaire Interview on ESI Money?
NET WORTH
What is your current net worth and how is that different than your original interview?
I will break this down by category so my explanations below will make more sense.
My numbers are 4 year changes since I do more detailed PFS statements at year end for my bank lenders. It’s also been a little over 3.5 years since my interview questions were answered.
FYI, numbers are in thousands…
- Spouse Roth IRA: $1,750 to $5,067, $3,316 gain or 189%
- My IRA: $500 to $471, $29 loss 5.8%
- Brokerage: $500 to $10,713, $10,212 change
- Cash: $1,000 to $1,544, $544 change
- Investment Real Estate: $30,000 to $31,710, $1,710 change
- Investment Debt: $19,000 to $20,349, $1,349 change
- Net Investment Real Estate: $11,000 to $11,361, $360 change
- Misc Partnerships: $1,400 to $1,400, no change
- Florida land and home building: $1,000 to $1,000, no change
- Home: $500 to $550, $50 gain or 10%
- Home debt: $175 to $127
- Lake House: $200 to $250
- Misc: $225 to $225
- Deferred taxes: $2,000 to $2,000 likely an increase here but not shown for this model for comparative purposes
Original total: $15,900 to $30,454, $14,554 change or 91.5%
In addition I would guess we paid $1,600 in taxes, $450 in donations and $1,400 in living expenses.
We had close to zero W2 or earned income and about $17,960 in total income. The total income includes change in asset values, real estate income, investment income, gains in real estate, land development, and home building in FL.
What happened along the way to make these changes?
By far the strongest positive was stock market returns from April 2020 to Dec 2021 that likely were in the $12 million range. I was pretty aggressive in buying very heavily into some beaten down stocks during Covid. I did have a substantial loss on GameStop in here so it should have been better.
By far the biggest negative was 2022 stock market returns in the negative $5 million range. I didnât believe inflation was as bad as it was. I didnât think the Fed would raise interest rates that much and I was so convinced of the fundamentals of the home building stocks and my timing was off.
Florida land development was a couple million positive. As part of an investment group we put land under contract to buy and do all engineering, entitlements, and sometimes improvements and sell lots to national homebuilders. It was a great run but we have not pursued any new deals since 2021 and we have a couple more deals that will close in 2023 or 2024. Itâs a really long process to go through all needed engineering and entitlements to build a new housing subdivision.
Florida home building was about $1.5 to $2.0 million positive and we built and sold close to 50 homes. We have a few more to build and sell and a 28 lot townhome project we will likely build as rentals.
Real estate portfolio of investment property generated income in the $6 million range over 4 years.
Overall I was incredibly pleased with our four year numbers for income and change and net worth. I definitely made a huge number of mistakes but the positives substantially outweighed the negatives in three of the years.
What are you currently doing to maintain/grow your net worth?
My goals are about 8% to 10% return on assets in investment real estate with blended debt cost under 5% that enhances my return on equity.
My goals are 17% returns in stock market.
I target returns in excess of 20% on any money invested in land development or home building.
EARN
What is your job?
Investor in stocks, real estate and an occasional business.
I try to be an investor only and either have partners that do the vast majority of the work or professional management company for the income producing real estate.
Most of my time is spent reading and researching investments and monitoring economic conditions.
What is your annual income?
See above.
How has this changed since your last interview?
My average annual income/change in net worth jumped up since my last interview due to gains from stock investments during covid resulting in a much higher investment base in stocks now.
I also did well in investing in land development and home building in Florida. Overall I feel my investment real estate is not well positioned by asset class or location but it still did ok.
Have you added, grown, or lost any additional sources of income besides your career?
No.
SAVE
What is your annual spending and how has it changed since your interview?
Itâs gone up and we will try to donate more and spend more moving forward.
My guess is we are in the $400k spending range with goals to increase that some with experiences and spending on the family.
We bought a new Jeep Wrangler and Acura MDX this year so spent some money on cars. Getting a new pickup in 2023. Likely have two weddings that we will pay for over the next couple years.
We are planning on donating far more and are starting to donate 10% of gains in stock market rather than realized income.
We will likely donate $200,000 to $300,000 this year, not included in our spend number.
Taxes in the $500,000 plus range, so all in pretty close to a million a year in grand total spend.
What happened along the way to make these changes?
I view Save for us as change in net worth for the year from investment earnings and change in investment asset values offset by all spending. That is because our earned income has been basically close to zero over the last 26 years since age 31 was the last time I worked for a company not owned by myself.
At 28, I was CFO for a company and was a very small owner in the business but more of my income came from my ownership than my W2.
I have made some really good investments and some really bad investments:
- My most recent bad investment was going neutral in the stock market by putting in a short position that was about equal to my long positions in Nov 2022. This has been a multi-million dollar mistake over the last three months.
- I made a bad short in GameStop that was $1.5 million in a couple days.
- I lost a huge amount of money in real estate investments in 2008 and had a lot of debt that could not be repaid.
- I made some great real estate development investments in 1999 to 2006 that were favorably impacted from leverage.
- I made some really good stock market investments in 2008 and 2009 and used margin to amplify the returns.
- I made some really good stock market investments in summer 2020 and used margin to amplify the returns.
- I made some great real estate investments in 2012 to 2015 buying bank owned quality buildings at a significant discount.
- I made some good real estate development investments in Florida over the last five year years.
My save and investment really are close to one category for me.
INVEST
What are your current investments and how have they changed over the years?
I started as a W2 employee at a big six firm as a CPA and spent most of my income but saved around 10% to 15%.
At 27, I became CFO of a start up company that grew to over $100 million in revenue and went public when I was 30. In combination between w2 income from the job, bonuses and stock, we created a net worth of just over $1 million by 30.
I left that company and finished my MBA and started an IT consulting firm and became a partner in a commercial real estate development company.
From 30 to 38, I created about a $12 million net worth and then cratered it back to under about a million in the 2008 downturn.
From 2009 to 2018, it was a rebuild from investing in the stock market in 2008 to 2010 and then in purchasing bank owned commercial real estate.
Our net worth by the end of 2018 had eclipsed our previous high net worth.
What happened along the way to make these changes?
I made a lot of really good career and investment choices and had an incredible mentor.
I could see the downturn coming in 2008 and could not convince my partners to sell and move to the sidelines. Itâs a horrible idea to personally guarantee debt that you donât control when the property is sold.
In 2008 with the downturn, one of my partners and myself spent hundreds of hours trying to figure out what to do to rebuild our net worth. We came up with the idea to buy a million shares of GGP at $.27 a share. We knew their real estate portfolio was still pretty good and the stock should have been worth at least 10x that number.
I made some money buying and selling it and then got nervous because they were going to go bankrupt and it is really, really rare for common shareholders to make it through a bankruptcy. We knew the bankruptcy was needed to buy time to restructure and we felt all the debt could be repaid and there was millions in equity value. I got nervous and sold the entire million shares at $.44 a share and it never dropped below that level and they came out of bankruptcy and the stock was $20 plus a share within a couple years. That was my single biggest financial mistake ever.
I made a lot of other good decisions in buying some other stocks but at that time all you needed to do was be a buyer while others were selling.
Once banks started selling off commercial properties at substantial discounts, I partnered with my mentor and we started building a portfolio together. I spent a lot of time looking in Florida and bought one investment down there but most of what I bought was in the Midwest in the crappiest state in the US for investing. The investments worked out fine but the Florida ones would have been so much better for the long term. We also should have invested in residential rather than commercial.
Life is full of making mistakes and making some good decisions.
A great quote is from Teddy Roosevelt:
It is not the critic that counts, not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood who strives valiantly; who errs, who comes up short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory or defeat.
MISCELLANEOUS
Overall, what’s better and what’s worse since your last interview?
My dedication to family and faith has improved.
I truly treasured the time we were able to spend during the covid shutdown as a family playing games, making dinners, reading, doing puzzles, breaking all kinds of rules to spend time with friends, watching church on TV together, and enjoying time at the lake with our extended lake family.
Every single time I go through a downturn in my life I truly see the hand of God helping pick me up and put me back on the battlefield in a new direction.
I am involved with a prison ministry, Kairos, and the changes I see in the lives of hardened criminals is nothing short of a miracle.
What are your plans for the future?
I really want to travel more, there are so many places to see around the world.
I definitely would love to sell my Midwest assets and 1031 them into new rental residential properties in Florida.
I want to be a mentor to others that are interested in fields that I have expertise in.
Hopefully someday be a grandparent.
Spend time with my wife, kids and friends and treat everyday as the new gift it is.
Given that you have a bit more wisdom and experience, what advice do you have these days for ESI Money readers?
For someone young and starting a career to not be afraid of risks.
For those in retirement or close to retirement a Buffett quote is best:
“The first rule of an investment is donât lose money and the second rule of an investment is donât forget the first rule.”
SMB116 says
Wow what an amazing story and update to your first interview! Sounds like you have done a great job in growing your net worth through investments.
I am interested in learning more about trading stocks to generate income during retirement starting next year. Any advice you can provide in terms of tools, books, periodicals, etc. that you use to help with this and for doing your research?
Appreciate any insight you can provide. Thanks in advance.
M-39 says
It is my perception that the retirees that have the lowest stress and overall strong returns with minimal taxes are the buy and VTI or other low cost broad market ETFâs. If someone is 25 and is putting $6,000 a year into a Roth, I think if you can figure out how to outperform the market that is great since if you blow up it has very little long term impact. I have know way more people that have lost money trading than made money trading. I still make so many mistakes every day/month on my trading. I strive to buy earnings at a good price/book and P/E ratio. My latest purchase is US bank at just over 1 times book and they should be able to continue to earn 12 to 16 percent on book value. I am always beyond glad to share what I am buying and why and glad to engage in conversation on where someone disagrees with my earnings assumptions. I canât predict stock prices and donât try.
M-124 says
This is a great profile show real balance across several âasset classesâ.
You get it. Make a plan. Follow the plan. Donât quit when it gets hard. Win over time.
I have a large âMan In The Arenaâ hanging on the wall in my office.
Spot-on.
M139 says
That is awesome with the man in the arena poster. I also need the poster that shows the victory and leaving the arena for greener pastures
Scott says
Thanks for the great story about your investment ups and downs.
Particularly your top bullet “…recent bad investment was going neutral in the stock market …has been a multi-million dollar mistake over the last three months.” is making me feel just a little bit better about some of my own recent investing mistakes.
Yours is a great message about perseverance. I need to fight through the paralysis caused by recent errors and get back in the “arena” as you reference.
M139 says
Paralysis caused by past/current mistakes are so hard to get through. I struggle with that really often. So easy to play the could have/should have game with yourself.
ol70 says
Damn, I feel like a total slacker by comparison as you obliterated my returns during the same timeframe. Fortune favors the bold!
My only suggestion is donât wait on the travel & experiences stuff, I lost a very close friend to cancer a couple months ago at 55 who was also extremely successful, we are playing with house money once we get into our 50âs and time is excruciatingly more important than adding another $1M or $10M more to a pile of money thatâs already so big you wonât spend it.
Iâve been relentless on the travel and seeing the world side of things since retiring at 43 about 9 years ago, itâs pretty amazing and I feel like Iâve just scratched the surface and a little upset with myself I waited as long as I did. Good luck with the next phase you earned it!
SMB116 says
I appreciate your comments on here regarding enjoying life and traveling. Life is too short to spend so much time working…..
Wondering if there are any particular tour companies or trips that you would recommend? Looking for a nice trip to celebrate my pending retirement in January, 2024….travel is definitely on the top of the list…(Italy, Israel, Switzerland, and Portugal are high on the list!!)
ol70 says
Oh my, the list is very long, but I can tell you unequivocallyâŚif I could only go back to one place before I leave this earth it would be to spend another week on Tetiaroa at the Brando Hotel. It literally makes the Four Seasons Bora Bora seem like a Red Roof Inn by comparison. The ideal time would be fly to Tahiti, then go spend 5 days exploring Moâorea ideally on a charter sailboat, but if not on land, then head over to Tetiaroa for 4-5 days. Itâs as close to paradise as it getsâŚI can absolutely guarantee youâll thank me after you visit. Itâs the one place I think of almost everyday, and weâve been to some amazing spots.
Congrats again and just do it! The best part is there are another 200 atolls to go explore, we liked it so much we are building our own boat to do just that. Cheers!
Smb116 says
Thank you. Sounds amazing. I will definitely look into it. Appreciate your sharing
M139 says
I would travel 2 to 3 weeks a month or more if my wife would. There is a huge amount to the saying happy wife/happy life. We vacation about once or twice a month now and have gone Turcs, Cabo, Colorado, AZ, Atlanta, multiple MI and FL for trips so far this year. I am poolside at Biltmore in Phoenix as I type this.
ol70 says
Iâm writing this using Starlink in the Caribbean on a catamaran 4 of us sailed sailed from The Grenadines to the Panama CanalâŚjust caught our first glimpse of land since Aruba on Monday đ
M139 says
https://www.sojournexperiences.com/
DM me if you want an intro since they just do small group trips and itâs somewhat invite based.
It is one of my business partners that owns the business. I have not been on a trip yet but my friends have and they are amazing and a great select group of people that go. We will be going in the future.
MI 343 says
Thank you for sharing your amazing update!
I particularly like your comment, “Every single time I go through a downturn in my life I truly see the hand of God helping pick me up and put me back on the battlefield in a new direction.”
I love the scripture about the Lord not witholding good from those who walk uprightly before Him.