“… unlike anything you’ve ever seen, heard, or read before. I personally guarantee it!”

This Genuine Multi–Millionaire Wants To Teach You How To Build Real Wealth!

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“The content revealed is truly gold dust!” — Dan, UK

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We briefly discussed debt when I shared The Only Reason For Money (KLE33):

This IS Bad Debt and should be avoided at all costs!

But, that’s only a small part of the ‘debt story’ so, let’s take a deeper dive into this important subject right now:

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Remember: The Object of The $7 Million 7 Year Wealth System is to end up with MORE money – a specific amount of money by a specific date – the object isn’t to SAVE money, PAY off debt, BUY a house, and/or START a business … they are all just possible steps along the way.

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!

Open 1 clinic, 2 clinics, or 3+ clinics? What would YOU do? These are non-trivial questions: make the wrong move and you can defeat any chance that you had to reach your Number.  So, how NOT to leave this critical decision to chance? Well, Scott ‘benefited’ from his turn ‘under the spotlight‘ so, we already have some insight as to where he is heading with all of this.

Now, you can read Scott’s latest thinking … what do you think? And, can you help Scott ‘only’ get 12% compounded on his money?

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Ok, now that i’ve laid it all on the table about my plans and strategy to get to my number of 4 million in 9 years, I’ll just summarize a few things.

First, I’ve realized that opening clinic after clinic after clinic in multiple succession is not necessarily an optimum plan to get me to my number faster. Running the numbers on opening 3 clinics as fast as reasonably possible does not produce a higher number within 9 years than opening 2. The reason being, is that takes capital, to the tune of around 100 grand to get an office up and running and cashflowing positive, not to mention it takes valuable time and a big drop in salary while it’s developing.

If i’m moving things along at warp speed, I can cashflow positive an office in 6-8 months, but looking at the numbers, this sudden drop of 100k to open an office, coupled with the fact that I have to hire a new associate PRIOR to starting up the next office, spend at least 6 months minimum training them to run an office by themselves before I can turn them loose on their own at my old office and they can be reasonably capable, pay them a fair salary during this training period (while they aren’t producing a dime of income and actually dropping the clinic performance, due to patient lack of trust in a new doc a well as my focus being so much on the new doc and less on running the practice), continuing to pay them and increasing salary while i’m at the “new” office building(this drops my salary from the previous office dramatically and remember, i’m not making anything on the new one until it cashflows positive) etc…etc…

NOW, if my goal was to work for 12,15, or even 20 yrs, you would see that NUMBER double and even triple on the backend. Once you own 3 clinics and they all have well trained docs, all cashflowing very well and everyone is happy, it’s easy to have cashflow to the tune of 50k per month to invest. This builds quite a Number very fast, but this process takes a few years before the plane even gets off the runway. It’s a helluva 15-20 years plan for major wealth, just not a good 7-10 year plan.

Now double checking, triple checking and quadruple checking my math says that if I can achieve a 12% gain on my cashflow, while keeping my lifestyle the same, I can accumulate 3.2 million in roughly 9 years by continuing out my contract over these next 29 or so months, then getting an associate asap and moving on with the next clinic startup and just sticking with 2 clinics. At that time, I can sell both clinics for roughly 300k each and when adding those funds to my other assets (home equity at that time, rental property equity, etc…) that will put me right around 4 million in 9 years.

Now, I have to make sure I can produce 12% per compounding with this cashflow…..the next question is, how do I get this rate of growth on my money? Stock market coming out of a recession? Continuing to add rental properties and hopefully great foreclosure buys to my portfolio? Steadily purchasing tax lien certificates in states with a high return rate? Buying the commercial properties that these 2 offices reside in? A combination of all the above?

Also, just for kicks, I ran the numbers on just owning the one clinic the entire 9 years and not even opening a second office, keeping our lifestyle the same and investing all the cashflow. Interestingly, it produces very close to 3 million in those 9 years if I can get that same 12% return. Now think about that one for a minute. 2 clinics “only” produces 200-300k more over that 9 years (plus the 300k value of the second clinic itself if it were to be sold, so I guess i’m looking at more like a 500-600k difference in the end at 9 years) so you can see from the above example, the multiple clinic ownership REALLY needs time to take off and produce meaningful results. Definitely not a get rich, really quick plan, but more of a “get REALLY rich in 20 yrs” plan.

Any suggestions?

Best ways to almost guarantee at least a 12% return on your money?

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?

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Good Luck!

This is one of our last structured exercises …

… soon, our paths to our Number will begin to diverge and we won’t be able to neatly keep every one of the 7 Millionaires … In Training! – and, our readers – on exactly the same path.

Right now, though, we have one of the most important MM201 exercises of all: Assessing whether the ‘ad’ that you have placed on Craigs List will actually be able to do its intended job!

Will your selected Growth Engine actually have sufficient ‘grunt’ to carry you to your Number on (or before) your required Date?

Will it do the job?

So, you have chosen business, real-estate, stocks or some combination of all (for most of our MITs this is true) as the vehicle to carry you to your Number, and you chose it based upon:

a) a calculation of your required annual compound growth rate, and

But, is having faith in Michael’s guidelines good enough for YOU … do you want to put your entire future in the hands of somebody else, or do you want to come to your own conclusions?

Even if you are a person of immense faith in others (is naïveté a better word?) as am I, are you really guaranteed a, say, 50%+ compound growth rate if you choose to start a business, as Michael Masterson’s table suggests?

Of course not! Let me give you an example:

In 1998, when I undertook as similar analysis, I had already decided that my little finance company was incapable of growing enough to reach my Number / Date … it wasn’t the Craig’s List ad that I needed to run!

So that left my fledgling call-center business to do the job; but, at that time it was growing VERY slowly with just 5 customers in 5 years … and, was losing $5k a month. Yet, something told me that this was the place to start looking for my Growth Engine …

…. here are the steps I took in order to confirm my suspicions:

i) Find my Number / Date: this was then $5 Million in 5 Years

ii) Decide where the bulk of my Number was going to come from: selling my business in (target Date) 2003 for (target Number) $5 million

iii) Decide what income/profit the business would need to generate in order to be ‘worth’ that much to a typical buyer: well if these types of businesses sell for 3 to 4 times annual earnings, then my business would need to generate, say, $1.5 million net profit each year by the time 2003 rolls around.

Note: other businesses may have different multiples; e.g. doctors’ surgeries might be based upon a multiple of sales; RE might be based on a ‘capitalization rate’ of, say, 7% for commercial, etc.

iv) Decide if/how my business could get from -($5,000 x 12) to +$1.5 mill. in just 5 years: in my case, I realized that my business would need to have almost every single large corporation (both private and public) in order to reach my Number!

So, I ran some ‘what if’ scenarios with a spreadsheet and realized that if I could change my business model to include a number of new lines of business, not only could I reach my Number, but I would only need to be exactly 1/11th of the size of the public company whose annual report I modeled my own numbers on.

 Unfortunately, soon after, the government changes some rules that would have required millions of dollars in capitals security bonds to secure the necessary licenses for the type of business that I wanted to move into, to it was back to the drawing board for me!

v) Once I realized that the business/investment could NOT go from i) to iv) satisfactorily, then NO PROBLEM (well, after a few sleepless nights and a lot of soul searching): I wrote a NEW Craig’s List ad and went back to Step (i) …

You see, I ran some new ‘what if’ scenarios on my spreadsheet and realized that if I could simply change my existing business model to assume major overseas expansion … and, the numbers worked!

At least on the spreadsheet …

… I quickly realized that finding the capital to fund the expansion (and open operations centers in multiple countries) would also require a lot of capital that I didn’t have, but I ‘solved’ that problem (at least, on paper) with the idea of setting up each overseas operation as a separate joint-venture!

From that point on, the rest was ‘simply’ about the execution …

Now, what about you? Can your Craig’s List ad take you to your Number? If not, what are you going to do about it?

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We’re not ‘playing in the sandpit’ any more

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.