This unique Guided Learning Experience is about wealth … real wealth.

But, what does that mean? We’ll be working on that together … very soon.

First, let me ask you a question:

Exactly, how rich is ‘rich’?

It might surprise you to learn that there is no universally accepted answer to this question … but, in our first lesson (called a Key Learning Experience, because they are mostly interactive), you will have a chance to tell me how much money you are aiming for.

And, I will make a promise, whatever ‘number’ you have in your mind today, be it $1  million, $5 million, or even $50 million:

Within just a couple of weeks from today your Number will change!

In just a couple of days, I will share my own $7 million 7 years journey, but I didn’t always have that Number ($7 million) in mind … in fact, until I began that 7 year journey, I didn’t have any number in mind … no wonder I was still $30k in debt.

But, more on that later.

For today, let me explain why there is no universally-accepted Number:

Recently, a US-based research consultancy asked its wealthy clients how much money they thought people needed in order to be considered ‘rich’.

The problem is that they asked people who were already Rich!

So, most wealthy people said $5 million net worth, but some said as much as $25 million.

This large variation was related to how wealthy the person being asked the question was … the more they have, the more they spend, so the more they believe it takes to be ‘rich’.

Only one in five said $1 million, which is what many people just starting on the road to wealth believe means ‘rich’ … when you get to $1M tell me if you are ready to retire (I’m quite certain that the answer will be NO!).

I think the ‘number’ is somewhere between $100 million and $1 billion …

… as one Billionaire said recently, after his company stocks grew five-fold in less than 12 months moving him from $1 Billion to $5 Billion net worth: “once you get past the first Billion the rest doesn’t matter.

By my own standards, ‘only’ having made $7 million in 7 years (starting in 1998 being $30k in debt), I am not at all rich.

But, I am wealthy!

I am wealthy because I can afford to live my ideal lifestyle – the lifestyle that I am living now – for the rest of my life … without needing to work!

Now, we aren’t slouches (nice house in a great suburb, the ‘right’ cars, schools, vacations, etc.) but we have no helicopters or Lear Jets … but, we aren’t rich, and I have calculated that my desired lifestyle, while lavish doesn’t require me to be $100 million to $1 billion ‘rich’.

And, I am pretty sure, neither will yours.

So, to determine when you are ‘rich’  – or, at least wealthy – you first need to determine your Number:

Your Number is the amount of money that you need to have ‘in the bank’ (actually in Passive Investments : bank accounts, investment properties, stock market … anything that makes YOU money even while you are asleep) to produce enough income for you to live your current (or desired) lifestyle for the rest of your life (which means, the amount has to be indexed for inflation).

I’ll show you how to find your Number in this first module of the $7 Million 7 Year Wealth System. And, in the remaining modules, I’ll show you how to get there … and, stay there!

It seems that the US does stop for 4th July celebrations for about a week or two … go figure! But, just when I was beginning to think that the 7MITs feel that they have enough to go on without our help, Jeff pops up with this interesting post … for all of you with real-estate and/or stocks in your future, what’s the huge breakthrough that Jeff has discovered?! It’s right here in his post …

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As a quick recap…

• My life purpose is to “Lead and develop leaders.”
• My number is 10 Million on 1/1/19
• My current Net Worth is $672,290
• My annual required compound growth rate is ~ 30% +/- a couple %.  I’m finding this number is fluctuating a bit, but seems to average out to right around 30%.
• My selected growth engine is real estate investment and individual stocks

According to Masterson’s Table I should be able to generate ~ 30% with my growth engine.  Over the past couple weeks I’ve been researching both elements of my motor to determine whether I believe Masterson’s results.

What follows are my predictions, guestimates and silly wild a$$ guesses as to what I might be able to expect in annual returns and its affects on my number.

Now I make no claims as to the accuracy of these results.  Remember, it’s product of my research online and work with a calculator.  I welcome all comments and corrections.

Real Estate: In this first round I only considered residential real estate.  I need to repeat this exercise for commercial real estate and hope this post will generate some discussion in that regard.

In my analysis, I initially considered my returns as a percentage of the property value.  Then it dawned on me that my actual growth should be determined by how much of my own skin I have in the game.  In other words my returns are a function of the down payment I put into the property.

I assumed I would be buying properties in the $150K range with 20% down (i.e. $30K).  I planned for a 30 year loan at 6% and positive cash flow with an anticipated holding period of 10 years.  Tax benefits and purchase discounts (e.g. good deals, foreclosures and tax liens) were NOT considered.  I view them as icing on the cake.

Bottom line for me: the business fundamentals of the property must be sound before I lick the icing.

10% is nothing to sneeze at, but when you compare the returns to the amount of money I’d potentially be investing (the down payment), it quickly becomes apparent why real estate investing can be so attractive.

Individual Stocks: When it comes to stock investing, I’m going to stick to the value investing principles made famous by investors such as Warren Buffet and laid out in books like Phil Town’s “Rule #1″.  I will be doing my stock analysis centered on the requirement to make 15-20%.  Also many of the stocks I anticipate investing in will likely pay dividends on the order of 3-5%.  Putting the two together, I think I can possibly gain 18-25% annually with this approach.

Revving the Engine: Simple math here throws out a potential annual return of 68-75%.  Wow!  That’s basically double what Masterson came up with.  I’m not claiming Masterson is wrong, but if I were writing a book, I’d probably low ball the results a bit hoping that most folks would see better than published results.  I’m hopeful that was his approach.

Pulling My Little Red Wagon: If I hook up my growth engine to my little red wagon, I can begin to see how achievable my number really is.  Here I projected my current net worth ($672K) out to where I think it will be on 1/1/10 based upon my recent growth rates, then started running the math on an annual basis at 68% growth.

This of course assumes my entire net worth is fed into the engine.  I can tell you right now, I don’t have the intestinal fortitude to pump it all straight into the machine.  Although it would mean reaching my number in about half the time I’d planned.  That’s a plus!

Another way to look at the numbers is to ask the question, “How much of my net worth do I need to feed the growth engine in order to hit $10M by 1/1/19?”  The answer to that question is 49%.  I can live with that.

My profile then begins to look like:

Conclusions: I can most likely use a combination of real estate and stock investment to reach $10M by 1/1/19.  I should anticipate returns on the order of 30-68% and be ready to commit between 49%-100% of my net worth to this investment strategy.

What do you think of my analysis?

As we head into the July 4th holiday weekend it’s an opportune time [AJC: did you think I was just going to let you sit on your deck watching the fireworks when there's serious millionaire-making to be done?! ] to consider your journey: assessing whether the ad that you have placed on Craigs List will actually be able to do it’s intended job …

… will it take you to your Number on (or before) your required Date? Will it do the job?

Note: You need to be a Premium Member to view this content:

Good Luck!

As Josh found out I like to put our 7 Millionaires … In Training! under the virtual ‘spotlight’ when they have an issue, question or decision of note. It doesn’t mean that there’s anything wrong, it just might mean an opportunity to examine their current strategy with all of our readers … you never know where the next Million Dollar Breakthrough is going to come from!

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Scott is busy working on our next exercise [AJC: watch for more details in an upcoming post!] and realizes that he has reached a bit of a fork in the road:

I’ve been putting some numbers to the test the past couple of days. It’s funny, I had began getting elated because I felt like I would be able to easily get to my number a few years earlier at my current growth rate, but as i’m crunching the numbers on my plans and everything, i’m finding that I’ll ‘just barely’ arrive at my number in about 8.5 to 9 years = the exact amount of time left that I determined in my original 10 year plan, lol.

‘Barely’ scares me a little because – besides the obvious: Scott makes his exact Number of his exact Date [AJC: sure ... and, I'm a balding hippopotamus ], Scott is likely to:

- Overshoot his Number by his Date … yay!

- Undershoot his Number or delay his Date … potential disaster, IF Scott’s Number/Date is critical.

In other words the benefit of overshoot is far outweighed by the potential that he simply won’t make his Number by his Date … so, we have to do a little more work. I asked Scott to clarify, according to his current plans:

1. How many practices does he need? And, according to what opening schedule?

2. Did Scott also assume owning the properties and build in some allowance there?

Scott said:

I just ran the numbers again for:

Owning 2 clinics, the first one outright in 30 months of course and then getting another one off the ground in approximately 1 year after that by using 100k of my ‘war chest’ money to open the office. I’ll have around 150k ‘left’ in that war chest after using the 100k to open clinic #2.

I also factored in keeping my current rental property, getting it refinanced to get rid of the interest only scam mortgage that I currently have on it asap(jeez, I was so financial dumb when I bought that house) and factoring in an appreciation rate of 4% per year(this may be pushing it too due to the current market, but it is in one of the most sought after parts of the city for families), plus factoring in the $500.00 per month extra cash flow from that property earned to go into the war chest.

Factoring in purchasing both of the commercial properties that both offices operate in at estimated values of 300k with a 25% down payment and a 10 year mortgage term each and selling them at the end after enjoying at 6% per year increase in value for a few years(once again, this may be pushing it!).

I also factored in the cash savings along this trip to be getting 12%(dunno if this is realistic or not, but if we come out of a recession, I would think I could at least get that kind of a return on my accumulating cash by investing in a few good stocks??)

This took me to right at 4 million in about 9 years from now if I sell the practices off for their fair market values(around 300k each), sell the commercial properties that they sit on for a reasonable price, taking into account equity gained from regular mortgage payments and estimating the 6% per year appreciation, selling of the rental property and gaining a 4% appreciation each year from this year forward, taking into account equity gained from regular mortgage payments applied to that mortgage and adding this all to my number, AND on top of all this, getting 12% on the cash flow from these 2 businesses along the way by investing in stocks after the ‘war chest’ money was used to get the second clinic off the ground and down payments were made on the 2 commercial properties to acquire them.

So, here’s the picture: again, it’s very rosy in that just owning a couple of nice medical practices and plowing the profits into RE can produce an incredible Number, like $4 million in as little as 8 to 10 years …

… but, there are some risks:

- Scott just ‘barely’ makes his Number according to this plan, and

- there are some assumptions, particularly around the returns from stocks, that bother me.

In fact, I’m wondering – if Scott reran the numbers assuming just, say, 8.5% return on cash invested in stocks, and again at, say, just 4% (assuming the cash just sits in the bank) as a ‘sensitivity test’ … would that change the outcome dramatically? If Scott’s model is highly dependent on this return, then he really has a stock strategy to get to his Number, and that’s pretty speculative!

Now, the final piece of information that I need to share before turning this over to you, is that Scott COULD offer to buy his partner out of his existing practice now … Scott can’t be certain if his partner would sell or not, and for how much, but he’s estimating about $200k. This would:

a) pretty much eat up all of Scott’s savings – and then some – for the next couple fo years or so – hence, ‘kill’ Scott’s stock investment strategy, but

b) potentially allow him to open up his second practice now rather than wait for 30 months before the practice would otherwise just be given to him (saving him $200k in the process).

Now, Scott’s busy crunching some numbers on all of these alternatives, but what advice can you give him? How/where should Scott invest (business? RE? Stocks? All? None of the above?)?

Most importantly, which fork in the road should he take?

Photo credit: pencilsoda

This last post in the current series signals the return of the 7 Millionaires … In Training ! to its ‘old’ home right here at the NEW, REVAMPED, BIGGER, BETTER, BRIGHTER, ALL-STAIN-REMOVAL:  http://7m7y.com.

Soon, we move on to the next phase of this ‘grand experiment’ and ask the 7MITs to really examine: “is this [their selected Growth Engine] an opportunity worth pursuing?”

With Mark’s “Craig’s List Ad”, it looks as though he has settled on Tax Lien Investing as his preferred vehicle to get him to his Number? Is it investing, or is it a business? Does it even matter? Stick around, and we’ll find out (if not in this post, then in Mark’s next ones) …

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I’ve been settling in the MM101 comfort zone for a while. Now it is time to move up to MM201. I do need momentum and I think I did not recharge enough from the previous exercises to move forward fast enough. I tried “forced” recharging via a business development deal with my accountant and encouragement from my peers but it is still not enough. The plan for me is to redo some of the exercises we did last year to plant enough fire for me to push through.

My number and my date haven’t changed. It is still $5million in 10 years. It is well explained in my previous posts. With my accountant, we have developed a business plan where I’ll spending the next few months preparing for tax lien auctions in South Carolina which will happen in the months of October, November and December. The goal for me is to review my training materials and to develop a written procedures for various targeted counties and also line up the necessary resources – property reviewers, real estate attorney and the bid history to get an idea of competitors and patterns. There is a lot of work but we spaced them out proportionately every month leading to October.

The first year will be focused on South Carolina. I’ll then repeat the process in other nearby states like Maryland, Georgia, Florida and Texas. All these states will fit in to a 5 year plan where there is a target tax lien acquisition, potential conversion, rough expenses, etc.

It looks like I have a lot of things going on. I know without a great push from within, it will not move very far. That’s why I’m going to go back and redo some of the exercises.

Wanted 1: Growing Tax Lien Holding Company

A growing tax lien holding company with operations in at least 5 states. Must have written procedures, templates and archived documents to operate in the various counties which have different proceedings. The written procedures must cover all stages of the tax lien process including due diligence, property review templates, redemption of tax liens, foreclosure processes, strategies to manage properties and established contacts with local resources  – property reviewers, real estate attorney, and investors.

We Have Lift Off

So this is where it starts to get really exciting, and fun. With the ground work of Money Making 101 in full effect, Money Making 201 can be started and more importantly maintained through the course of ones life. Had this foundation not been constructed, I would have inevitably increased my spending as my income increased during Money Making 201, diluting growth potential.  Good thing AJC has been thinking ahead.

My new number and date are officially 9 million by January 2016. but there’s no penalty for early arrival. The compound annual growth rate to arrive at this number is approximately 57% (I think in an earlier post I wrote 52%, I had used 7 compounding periods for the calculation, I arrived at 57% by using 6.5 compounding periods.) To achieve 57% CAGR, I will continue trading the funds in both my personal brokerage and 401(k) accounts until the liquid value becomes north of 4 million. At that point I will withdraw the funds from my 401(k), taking a large loss from taxes and early withdraw penalties, buy an apartment and start a long-short equities hedge fund. For the first one to two years the fund will consist of solely friends and family, this will save a bundle in administration fee’s, although the start up costs plus accounting fee’s will run about 35K for the first year. After taking on solicited investor’s and institution’s I will need to outsource the administration work and expenses will rise from there. But that’s no problem because with more money to manage, comes more opportunity. In an effort to minimize expenses and maximize tax deductions, the fund will be run from my home. There isn’t much that’s needed as far as assets to start the business, just a couple computers, phone, fax, copy machine, printer, just basic office stuff, most of it I already own.

I would like to have a shovel in the ground by this time next year, so stand by for launch.

One of the tools I am going to use to get to my number is the start up of a business. (I’ll also create an exit strategy).  Actually I’m interested in a greeting card business and I want to operate it on two levels (1). A face to face operation with clients who want my product and (2). An on-line sales of the same product.   I have been in touch with a man in Portland who just recently left this same business and he was very encouraging.

My problem is knowing just where and how to begin.  Mainly I’m looking for “who” do I need to bring along side me to assist in this effort?  Attorney, accountant, Small Business Administration?  Do I need to become an LLC and do I need to deal with Trade Mark issues and so on. Finally how do I approach investors and what is actually step one that will kick start this into motion?

My niche will be law enforcement and firefighters but of course it will have to be wider than that to really make a difference.  However there are very few real quality products out there and with my background as a law enforcement chaplain with national and even some world wide connections I believe I can touch a lot of interested people.  But again the question is where do I actually begin. What comes first?

This doesn’t seem like much to those who are already on the fact track to real estate and other investments but this is where I choose to begin with hopes of making money to then invest in other ventures.   After making a few minor adjustments via  MM101 I am beginning to feel a little less pressure with regards to my spending habits thereby freeing us some money.

If I went to craigslist I would probably post it in the following fashion:

WANTED “Greeting Card Associates”.  I am looking for people interested in getting in on the ground floor of a multimillion dollar greeting card indutry, must have expertise in  business start up. Specifically looking for an attorney, an accountant and professional type sketch artist.

Can You Find Your Number on Craigslist?

As I prepare for my entry in to MM201, I’m finding that my game plan is changing.  My original play book was aimed at achieving an annual compound growth rate of 38%.  However, in my previous post, I noted that recent increases in my net worth have reduced that requirement to just under 30% (29.28% to be exact).

That’s great for a couple of reasons

1. My number (10 Million by 1/1/19) just became more achievable.
2. I can take a step down on the risk ladder and still have a reasonable shot at achieving my goal.

As Adrian pointed out in a post over at 7million7years.com about Masterson’s Table

1. Real Estate and Stocks can produce an annual compound growth rate of 30%
2. Real Estate, Stocks and a small business can get you to 45% annually.

When I needed 38%, I was planning to take aim at the 45% growth engine to ensure I hit my goal  Higher returns tend to require greater risk and I was going to assume some to get where I wanted to go.  That extra risk is not necessary right now, so I’m going to put my business plans on hold and focus on REI and individual stocks.

In an attempt to jump start my progress (and to have a little fun) I placed two ads on Craigslist.  Who knows, maybe I’ll find my Number on Craigslist.

Wanted: Value Stocks for Long Term Investment

Seeking Value Stocks for investment opportunities in companies that possess consumer monopolies and a demonstrated history of strong financials.  Each company’s leadership must be passionate about the enterprise, care about its employees, provide value to it’s customers and keep the best interest of shareholders in mind.  Serious recommendations only, new risky start ups need not apply.

Wanted: Good Real Estate Cheap!

Seeking Good Real Estate Cheap.  Must be move in ready in good school districts.  Must be worthy of high quality tenants who want to fork over loads of cash in exchange for a roof over their head.  Commercial real estate offerings will be considered on a case by case basis, but must come with tenants already in place.

I’m relieved that my growth rate doesn’t force me to own a business right now to continue making scheduled progress toward my number.   As much as I want to start my own business, I suffer from two hold backs.  The first is I am not in a position to devote the time necessary to pursue any business plans because of my military commitment.  The second is that like Ryan, I’m struggling with settling on “The Big Idea.”

It’s not that I don’t want to lead my own company…quite the contrary.  I really do.  My life’s purpose is to “Lead and Develop Leaders.”  Owning, running, and leading my own business would pack a double punch.  Progress toward the number and an early fulfillment of my life’s purpose.

I’m fortunate that  in the military, I have a job that requires me to Lead and Develop Leaders…and I’m getting paid to do it at the same time.

To this point in our experiment we’ve been saying that we need to achieve our number so that we can retire and start living our life’s purpose.

I’m finding myself in a unique situation where I’m nowhere near my number, yet I’m fulfilling and living my life’s purpose already.

Does anyone see a problem with this?  I do.

The Exciting Adventure Ahead

Now is the time to get the engines going and steer in the right direction toward our Number by our Date.  Taking a look back at my notes and goals reveals that we’ll need a bit over 4 million by 2018 to live our life’s purpose and according to our required annual compound growth rate, we’ll need to average right at around 38% moving forward. I firmly believe in all of my heart that this is doable for us over the next 9 years. Here we are almost 1 year into this grand experiment and we’ve already far exceeded that compound growth rate for the first year(I believe last year when we first estimated this, it was closer to 40% required, so we are moving along nicely).  We had a 67% growth rate for the previous year. I would really LOVE to reach this number well before 2018. If we can shave a few years off, by all means, i’ll do what’s necessary!

According to the table by Micheal Masterson, http://7m7y.com/2008/11/13/draft-how-high-is-your-mountain/, we’ll need a combination of real estate and stocks together with small businesses as our vehicle to get that compound growth rate.

After thorough discussion on this forum and throughout this experiment, it appears that the best order of those modalities would be for me to start up additional businesses(in my case, clinics) and use the cash flow from these small businesses to purchase real estate(possibly starting with the commercial properties that these practices reside in) and stocks.

I believe that now is a better time than ever to make this all happen since not only do I have terrific experience in running a successful practice, but also in training associate doctors to actually run a new practice startup to possibly duplicate my own results.  Health care always does well in the midst of a recession(lots of stress as well as odd jobs being performed for people to keep paying the bills, this adds up to health problems and injuries). So getting a new practice up and going to successful numbers is in good favor, purchasing real estate is terrific right now due to the bursting bubble, low prices and dirt cheap financing(Phil Town also suggests that commercial real estate will continue to drop in prices as business failures flatten out) so that’s a check, then hopefully the cash flow will be occuring in perfect timing as we crawl out of a recession and all those wonderful, undervalued companies(and their dirt cheap stocks) begin to move back up in stock prices.

Anyway, this is my prediction or delusion! lol. Now my only delima in this whole situation is this; I’m currently under contract for the next 30 months to run this clinic I currently practice in. The deal is, 50% ownership of this practice was given to me by my previous employer(who has owned and operated multiple clinics for many years) and this 50% ownership was to span 3 1/2 years, at which time the other 50% would be given to me(for all my previous service). In essence, I worked for him as an associate for 4 years, made a good base salary, plus good bonuses(which my wife and I used along our Money Making 101 journey) then I made the move to the new clinic that was just getting going on it’s numbers and the deal began. The 3 1/2 year working span at 50% ownership at this new office was pretty much my payment for the other 50%. Well, it’s been a year that i’ve been there, so 30 months are left and I don’t want to do anything to jeopardize this deal, I want complete ownership of this clinic in 30 months, but at the same time, I feel that my hands are tied during this time period and it’s nearly impossible for me to open another clinic until i’m free of this deal.

If I owned this clinic completely at the moment, this would all be simple; I hire an associate dr fresh out of school, take them in as my padawan for around 6 months and train them pretty intensly on how to run this practice as I have and how to duplicate my results(as well as have a nice period where we are both working in this clinic, so that existing patients get comfortable with this doctor), then step away from this clinic, let this doc run the show for a fair salary and attractive performance-based bonus system, plus full benefits and I go and start up practice #2 and repeat! (Actually, the moment I have practice number 2 up and cash flowing positive and ready to hand over to trained associate #2, I could techically step away and begin to live my life’s purpose because we will have superceeded our “monthly number” in passive income, ala what such authors as Robert Kiyosaki, T. Harv Eker and Timothy Ferris teach =  Get to your monthly number in passive income and then you are ‘out of the rat race’ or you have ‘won the money game’ or you are on a ’4-hour work week’.)

The interesting thing about this idea would be that I could still keep a “foot in the door” sort of speak to still practice a bit(I do love helping patients, I just don’t like the daily grind and the ‘have to go to work’ situation or the daily dealings with insurance, so being available for occasional associate dr requested days off or 1-2 time per year vacation weeks for them or a bit of part time coaching would actually be kind of nice and fun to get to do). This idea would actually set us free MUCH faster and my passive income from these 2 offices would FAR exceed the income that getting to our NUMBER would provide. (If these 2 doctors generated only 75% of what I currently generate on average in practice and if I paid them a generous 6 figure income that was even more than I made as an associate plus full benefits for them and their families, my personal passive income total from these 2 offices added up would still be in the 20-25k per month range while my NUMBER would provide a little over 16k per month in income). Needless to say, my wife and I would still live on the 16k per month via our life’s purpose and would invest the extra money to grow our portfolio at the same time.

I guess i’ve sort of parlayed an interesting set of questions and possibilities for me in this post and where I am right now. Any suggestions?

Anyhow, my businesses might look like this in an ad:

Wanted: A very successfully run healthcare practice, specializing in spinal rehabilitation, exercise, massage therapy as well as other holistic services such as nutritional advice and expertise. Professionally run to the highest of clinical standards with a well-trained, goal-oriented staff, necessary equipment and supplies. Low monthly overhead, time-proven practice and business design system already in place, extremely high cash-flow and yearly profit margins, ongoing community marketing programs in place, all in a state and local community that harbors terrific heath insurance coverage for these services.  Totally turn-key, fully developed business design, everything from new employee training techniques, to patient marketing, to patient scheduling, to treatment programs and proven care systems are all in place and can be duplicated, expanded upon and repeated in additional clinic ventures and startups time and again. The commercial property that the clinic resides in may be purchased at reasonably assessed property value and additional rents may be collected by adjoining business that resides in the same building, once building is purchased.

After much ado, we are back with the newly upgraded, bigger, better faster 7m7y.com: home of the 7 Millionaires … In Training! ‘grand experiment’ in millionaire-making

You may not notice much change, but ‘under the covers’ is a small block supercharged chevy engine in place of the 4 cylinder Corolla engine that we had in place before …

Let me know what you think!

Adrian.