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. 😉
This update was submitted in October.
As usual, my questions are in bold italics and their responses follow…
OVERVIEW
How old are you?
77 and 64.
We have been married 36 years.
Do you have kids?
One son who is 41.
He owns three sober living homes, and his tenants are young people addicted to drugs or alcohol.
What area of the country do you live in (and urban or rural)?
Colorado Springs, CO; urban.
What was your original Millionaire Interview on ESI Money?
Almost four years ago — Millionaire Interview 244.
Is there anything else we should know about you?
I’ve realized for some time that I’m a serial entrepreneur who doesn’t really ever stop working. We have created Legacy Wealth with the bulk of our estate going to subsequent generations of our family, with no lump sums ever given, just income from the investments.
We live by an old Sicilian proverb, “Don’t eat the chickens, eat the eggs”. We have lived full lives, have been over much of the world, and now want to see if we can contribute to our heirs and their kids and grandkids in a meaningful way.
One of the big problems we see for our grandsons and subsequent generations is in housing. Thus, we will own homes in our trusts that we will allow grandkids and their families to live in, for reasonable monthly payments.
When their families grow and they need something larger or in another city, we will purchase another home and just continue the “rental payment” system. We are also using this method as a hedge against divorce.
If Grandma and Grandpa own the assets, there isn’t much to divide in the event of a divorce. Divorce became easy in 1969, and it’s too easy to do it today, with the primary breadwinner losing half of any assets.
Since most divorces occur over problems with money, we want to remove the two largest debts young people have – college loans and mortgages. We don’t know if this policy will work, but we are trying it and hoping that it will.
NET WORTH
What is your current net worth and how is that different than your original interview?
About $7 million. Four years ago, it was about $5 million.
Our homes have really increased in value, and we have paid mortgages down or off quickly, doubling or tripling our monthly payments in some cases. The commercial properties have increased in the normal manner –2-3% per year.
We added private equity, though I’m not sure whether to add this into our asset total. We have $339,000 invested and try to put in $40-70,000 in each year.
Each of the investments’ projections are a minimum of 10%. This equity group has only missed their target projection on two occasions in 16 years.
We have laddered the private equity investments into commercial properties so that each year, we will have at least $50,000 for our grandkids’ college tuitions.
- Residential Rental: $750-775,000 (no mortgage)
- Personal Residence: $1.4 million equity million equity (I valued the property at $200/sq,. ft., probably low, and we have about $400k remaining on the mortgage). We have added a pickleball court, large swim jacuzzi, and a new, spacious deck.
- Commercial Real Estate: $4,831,741
- Other Assets: cars, jewelry, boat, camper, guns $75,000
- Life Insurance: $57,000 Cash Value
- Private Equity: invested $339,999; dividends of a little more than $11,000 already have been received.
- Precious Metals: $10,000
- Stocks: $10,600
What happened along the way to make these changes?
I decided to get into private equity not long after I did the Millionaire Interview. As I read other millionaire interviews, I realized that I was very light in the securities area.
First, I sought out private equity investing through a strong local company, and the returns have been excellent so far. Additionally, one of their investments offered is the funding of their corporation, which is paying a flat 10% (checks issued four times a year). They do not reinvest the dividends.
I have purchased some stocks–indexed funds through Vanguard, thanks to MMM conversations that I have read, though these will go to the grandkids someday way out over the horizon. I also decided to purchase precious metals: physical American Eagles and dimes and quarters.
I recently started a new company called “The Story of Your Life” in which I will find old-timers like me who want to write their memoirs, not autobiographies, but slices of their lives which they want to share with their family members. It would be very inexpensive, and I would offer editing and consultation services plus formatting, cover design, and printing – either softcover or hardcover – for about $4 apiece.
I envision that my clients will print only 10-20 books each and hand them out to their family members and close friends as a Christmas or other gift. I have also been approached by kids who want to gift my services to Grandpa who has always talked about writing a book.
The idea came to me when I was writing my own memoir. I plan it to be about 25,000 words (100 pages), and I’m about 10,000 words into it.
I have many topics to write about as I believe most people do. It was great fun writing about how my wife and I fell in love and the events surrounding that.
Also, I write about my Marine Corps experience in Vietnam, not as much fun, but it was about time to revisit those times. I recently attended a (dwindling) reunion of Vietnam friends and many in the group brought out events long buried – 57 years to be exact.
Surprising how this spurs the memory.
What are you currently doing to maintain/grow your net worth?
Retirement will knock about $120-1500,000 a year out of our annual income. We will live on about $280,000 or so coming from rental income and from our property management firm.
We will continue investing in private equity and the market, with an occasional precious metal investment along the way.
EARN
What is your job?
Commercial real estate agent and owner of a property management firm.
What is your annual income?
About $400,000 (+/-) but that will decline after retirement.
I hope to make about $50,000 a year with my new writing venture, but that will probably take about three years to accomplish.
How has this changed since your last interview?
See above on retirement and starting a new business.
Have you added, grown, or lost any additional sources of income besides your career?
I’ll lose most of the brokerage fees, but that’s about all. We still have the rental income.
Commercial properties not in the high-rise category are doing very well in Colorado and this is the type of commercial property that we own.
SAVE
What is your annual spending and how has it changed since your interview?
Seems it’s always $120,000 to $150,000 per year. We keep only about $50,000 in liquid funds on hand.
We don’t go on as many trips as we once did but find that the trips we do go on are much more elaborate.
We invest the rest.
What happened along the way to make these changes?
We are saving for our grandkids’ college and grandkids’ homes, but not much for our personal savings accounts.
We tend to regard investing as “saving” though we know it’s good to have six months set aside in a liquid position.
INVEST
What are your current investments and how have they changed over the years?
As always, we are heavily invested in commercial real estate. Commercial is different from residential in that the appreciation is just 2-3% each year.
You get rich after 20 years of ownership. We have stopped buying new commercial buildings and will only do 1031 exchanges when we sell an existing building.
The down payments are high, and we keep asking ourselves how much is enough. Looks like we’ll be ok out over the horizon.
We’ve added precious metals for the first time to our investment mix. I belong to a junto (which, I believe, Ben Franklin started in the US) where one member brings information to be shared with the group at each meeting.
This way, you don’t have to be an expert at everything. At one meeting one of the members shared about Elon Musk’s life; another shared about out-of-the-way vacations, another was on home defense, and still another on precious metals.
Regarding gold and silver, several of the members chimed in, and I realized that I may need some of this type of investment as well, but only if the revolution comes. Coins in small denominations and ammunition will probably become the coins of the realm.
What happened along the way to make these changes?
One new thing that we might try is investing overseas. We have been investigating this for about three years.
But, if you don’t plan on living there, investing seems fraught with problems as we age and become absentee owners. We may invest in a beach condo in Egypt where residential values go up considerably each year and a nice well-furnished condo can bring in VRBO funds.
My daughter-in-law (an Egyptian) has a brother who would manage it for us, and we’ll pay him a fee.
MISCELLANEOUS
What other financial challenges or opportunities have you faced since your last interview?
Private equity is the main thing that we have added in a significant way. I wish I had invested with this company 16 years ago when they were just starting, but it’s never too late to get started.
My father used to preach, “There’s always a deal”.
Overall, what’s better and what’s worse since your last interview?
All real estate goes up in value if you can avoid the vagaries of the market and the temptation to sell at the low point. The problems are when the properties age and the maintenance increases.
We try to improve the vintage of our properties periodically by selling older properties and exchanging into newer ones. Commercial properties don’t suffer the wear and tear that residential units do.
What are your plans for the future?
We have recently taken on a two-day-a-week homeschooling assignment for our 11-year-old grandson. He goes to a hybrid school with regular school three days a week and two days at home, with plenty of homework.
I work with him in Latin which has been a little tough as it’s been 63 years since I took Latin in high school.
I am planning to play pickleball, stay in good shape, especially with the help of the carnivore diet. I have read nearly everything there is to read on this subject over the last couple of years and decided to try it about three months ago.
It is so easy, especially if you don’t like vegetables. I miss fruit, pasta, bread and desserts.
But I can cheat for a day or two and get right back on the horse and lose any weight I gained quickly when I cheated. I am down 25 pounds though my goal is to get down to high school weight.
Why not? I haven’t grown taller so why carry around all that extra baggage.
And I’m sleeping a lot better. My big meal of the day often consists of a ribeye, four eggs and bacon. I fill in with meat snacks or protein shakes.
So far, so good. As we age, we can get by on very little food.
Given that you have a bit more wisdom and experience, what advice do you have these days for ESI Money readers?
We try to tell young people to stay married. Almost any problem in a marriage can be overcome, with some tenderness and patience.
If you look at the concentrations of wealth today, married couples seem to have more chances at legacy wealth than those whose marriages are broken. (I might add that my wife and I have each been divorced, but we’ve stayed with each other nearly 37 years now, primarily by becoming students of marriage, reading everything we can on the subject).
The one thing that I’ve noticed is that I have slowed down mentally. My wife’s a young chick – mid 60s – but she also reports that she has slowed down as well.
Little things are forgotten: the roasted potatoes are cooked and the oven turned off, but they stay in the oven until they’re remembered the next day. I let little real estate details get by before someone catches me on them.
I try to tell people in their 60s that it’s coming, it’s best to be prepared, and keeping mentally sharp is one way to combat it (I hope).
Congrats on remaining so active (both mentally and physically) well into your 70s! I can only hope that I will be half as active by then. Do you have any tips to share on how to maintain your interests and health?
This was a very interesting read for me. Many things you do aren’t addressed in mainstream from what I’ve seen.
Your handling of real estate for your family is very interesting – purchase the house and then rent it to your kids. One thing that I note with this arrangement is it does not allow your kids to gain equity in their homes or real estate. How do you address this?
It’s a good question and something we have had to deal with in making the decision. We reasoned that housing was going to be a major sticking point in marriages and thought to reduce this area to discourage divorce. They will not gain equity, but at some point, out over the horizon, we would probably sell them the house for $1 and hope that they don’t divorce. It will become community property after such a sale.
Thanks for asking. We try to stay very active; before pickleball it was golf and tennis. But keeping up with grandkids from the day they were born has really helped us gain a new lease on life. Also, as serial entrepreneurs, I’ve just retired but that means starting a new business: The Story of Your Life in which I help elderly people write their memoirs for publication in a book. Not for general release but perfect for friends and family and subsequent generations who want to know who were grandma and grandpa.
Really interesting update. How did you get into commercial RE as a career, and would you recommend it as a career/investing idea today? The down payments required are truly high, so unless investing with a developer group or so it’s hard to get in. It is more interesting to me to be part owner of a retail center, hotel, or multi-use property, especially if you say they don’t require as much maintenance.
Really enjoyed this update. I am not in the millionaire club but have done something similar with real estate with my kids. When I moved about 11 years ago, I kept my old house and my oldest daughter lives there now with it being a rental. My son is looking to move out, and I am hoping to be able to do something similar for him. If/when they are ready to buy their own houses, I’ll decide then whether to keep the properties as traditional rentals or sell.
I believe you should rethink a daily meal of ribeye, eggs, and bacon. What estate planning documents do you have in place?
Sorry, Bev, I’m just learning how to reply to emails through the system. Thus, I’m not sure if I have answered your questions or not. Regarding estate planning documents, my wife and I each have trusts which revert to each other on the occasion of the first one’s death. We also have an ILIT (Irrevocable Life Insurance Trust) with some high-premium insurance policies in place that we have “funded”. They now take care of themselves, that is, paying of the premiums without further contributions. Hope this was helpful.
Thanks for sharing your updated financial situation since your last interview. I applaud you for the strategy you have taken with your homes and commercial property. As for the diet, have you tried intermittent fasting? I have been using this method, eating healthy and exercising to reach my high school weight. I have lost 20 pounds over the past 6 months and feel the best I have felt in years. I strongly recommend it. I currently fast for 18 hours off and then 6-hour window for eating with no restrictions ( I eat healthy and avoid processed foods).
Thanks very much for the good counsel. Regarding diet, I am combining Carnivore (which I really like) with intermittent fasting, but I only do about 15 hours. So far, I’ve lost 25 pounds and am sleeping a lot better. I’m back into a regular exercise program in hopes of losing another 25 pounds which will put me at high school weight. I’m giving it six months.
I appreciate your advice.
Well, since you started the topic…what was the cause of each first divorce?
While I’ve never been divorced myself, I’ve seen the results up close around me. It seems to me that many people in relationships just can’t be fully honest; with money or others.
Decades ago I knew an individual who was infatuated with me. But I got spidey senses something wasn’t right. Turned out the individual was a habitual liar about many things in their life. About a decade later they were divorced. When I heard that, I felt like I missed a bullet.
Thanks for sharing your update!