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?

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.

Quick and Dirty…

I couldn’t resist adding the photo …

But, a short post can be a sweet post, if it tells you what you need to know.

So, did it? What else can Jeff tell us and what can you tell (well, suggest to) him?

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I feel bad even calling this a “post.”  It’s so short that it hardly qualifies as a response.

The only changes I think I need to make at this point relate to my approach to long term investing.  As a reminder, I’m primarily using index based mutual funds in a variety of tax advantaged accounts (401K, Roth and Traditional IRAs, 529s).

The change I’m going to begin implementing is a move away from mutual funds and into a more concentrated portfolio of individual stocks based upon value investing principles.  To help me accomplish this move, I’m re-reading Rule #1 by Phil Town and am reading Buffetology by Mary Buffett and David Clark.

This will be a measured process of moving money.  I plan to move a portion of my money…test the results and then move greater amounts over as I see results and become more confident in the stock selection methods.  Future investments will be prioritized to non-tax deferred accounts so that I can access the funds when I deem necessary (hopefully by age 50) rather then when Uncle Sam says I can can.

By doing this I hope to do accomplish two things….

1. Grow richer quicker 

2. Access my money whenever I desire

As far as my debts are concerned, I do not intend to do anything about my mortgages other than continue to pay them monthly per the amortization schedule.  I intend to pay off my $17,500 bridge loan in May.

My other activities are in the realm of MM201 where I continue to fiddle around with increasing my income via a variety of online methods and look for opportunities to buy a business and more residential or possibly commericial real estate.

Connecting the dots

Photo credit: turtlemom4bacon

Aside from finding the quality of graphics on this site is definitely on the improve Mark has provided a great summary of the steps (and the reasons why) of this ‘grand experiment’ for new readers, even before we get to his table. Thanks, Mark!

It looks like Mark has no shortage of areas to dig into … how to turn this into his growth engine: any ideas? 

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All seven of us came a long way back in 2008 in this grand experiment. Now in 2009, it is time to look at what we have done before and plan ahead for this journey. For this post, we are aligning the previous exercises with this current one to find our growth engine.

We started off with the lengthy but necessary Life Purpose exercise. For this particular exercise, I found out that money has little to do with my life’s purpose but it does affect my ability to realize it.

We then attempted to quantify our life’s purpose by creating a spreadsheet and filling up our Lee’s List. This helps revise our Number and date and determine our Required Annual Compound Growth Rate.  At 40%, I’ll need to invest in real estate, stocks and small businesses.

Although we now have a destination, time and areas that we should be looking into, the scope is still fairly large. Let’s see how the latest exercise can help us.

Here is my table for this exercise:

Items in 4 columns

The common recurring theme in this exercise for me is that traveling or planning vacations and attending or organizing events or parties appear in all 4 columns.

I must admit, I love to travel but I’m limited by vacation time and ability to finance my travels. Right now, it is definitely heavy on the SPEND, ABILITY and DO column. How can I turned this into a future EARN item?

There are a lot of ideas – writing travel guides (books, blogs, etc); be a travel agent; be a tour guide; travel photographer; be a commercial pilot; etc. The closest thing I’ve done that is related to travel industry is being a trainee maintenance  aircraft engineer for a commercial airline. That did not work out for me. I think it has to be combined with other items like e-commerce or teaching for it to be more profitable. Let’s brainstorm for ideas.

Another 4-column item has to do with events or parties. I’m quite social and have organized events and parties  for myself and a few non-profit organizations. I haven’t done it for profit yet or organized any large scale event like a week long conference. I did attend a few good conferences and it is quite a logistic feat to pull everything together. Can I learn to be an event organizer? It does allow the ability to travel too since conferences are held in various cities.

Items in 3 columns

Let’s not overlook items that appear in 3 columns.  This includes investing, problem solving, and learning/teaching.

Again, this leads to a lot of ideas. I’m particularly fond of finding investing ideas be it in stocks, real estate or potential businesses. Problem solving is very general and could be applied to the various activities that we discussed. I enjoy learning new things a lot and sometimes find myself explaining new ideas that I’ve read about. I did think about being an academic and one point but since both my parents were teachers, I thought I should try something different. Something that I did not attempt hard enough is to combine investing with planning, organizing, and problem solving. This is the area I want to focus the most. I should be planning and organizing more investment related activities instead of vacation and events.

I think we got what we wanted out of this exercise for me.  It does give me focus on what needs to be done to align myself with my required growth engine, achieving my number and hopefully fulfiling my Life’s Purpose.

Photo credit: Duckscrossing

You can’t get there from here …

No, Lee, Ryan didn’t go AWOL … just slipped into the ‘think tank’ for a little longer than expected

Ryan explains what this means in his opening, but with this photo, I was as keen as you to find out! He knows that he has a big task ahead of him, and I will say that developing/selling some intellectual property (be it via a unique business model, invention, process, or whatever) WILL be his path to success, because it’s the only one likely to give him the ‘home run’ he needs, given that Ryan’s annual compound growth rate is well into ‘boom or bust’ territory …

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“You can’t get there from here.” This New England saying never made sense to me until I came up with my number! Can one get from 100K net worth to 16 million in under 9 years?!?! There is certainly no road map to go from, but there is no doubt it can be done.

Short of winning the lottery or getting a huge inheritance from some long lost uncle, it’s going to take a lot of planning, hard work, and a little luck. Fortunately for me (and the others following the 7m7y experiment), luck favors the prepared mind. Without getting too philosophical, basically what I’m saying is that if you want a million bucks (or a billion for that matter), it’s not likely it will fall on your lap without any effort from you. However, if you’ve set goals, come up with your number, researched, planned, put the hours in, and made it a priority, is it still luck when your an “overnight success”?

That is why the 7 MITs are putting up these posts showing how we think our journey might look to get to the destinations that we’ve dedicated the last few months defining. We all now know where we are right now. Those who have completed THE TASKS on 7m7y.com now know where they need to get to. And now we just have the MINOR chore of filling in the in between stuff.

My “in between stuff” will HAVE TO include starting my own business because my compound growth rate is 85% (see Scott’s post for a great explanation of this). Starting a saleable business is something I’ve always wanted to do anyway. Actually, I already own my own company, but as a medical device distributor it is unlikely that I would be able to sell it for the type of return I need to reach my goal of 16 million, so I don’t really consider it saleable.

I also want to develop some Intellectual Property. I’m in the operating room every day, so I constantly try to be aware of inefficiencies, improvements and things that are lacking. My business may start from some IP that I develop or I may just sell it after it’s patented.

Lastly, I believe my road map will also include, to a smaller degree, stocks and real estate.

So, I’ve chosen my vehicles, packed my bags, and I’m ready for this trip to start. Did anybody bring the GPS navigation?

Plotting the course

Photo credit: nicora

I love Mark’s “3 Years To [Insert investment activity of choice: Real-Estate; Stock Investing; Small Business; Online Business; etc.] success …” concept. I recommend that he trademarks it and – at an absolute minimum – registers some domain names now … such domain registrations to last at least 3 years, of course

Mark’s idea turns each ‘learning exercise’ into a future information product …

AJC uses the mountain as the analogy on how steep or difficult it is to reach our number. The number to me is a first step in deciding the destination. I’m not evaluating how difficult or how easy yet but it is an important first step. Having the number is like having the treasure map, it tells you where to go. There can be many routes to ‘X’ but we have to choose carefully. There can be quick routes or short cuts but there are more interesting routes as well that will give you the experience that you need.

Now that I have a destination, how do I get to ‘X’?

In my original application back in April, I mentioned that I was contemplating joining an MBA program part-time to move forward career wise. I did quite a lot of research for a couple of years, right after I completed a part-time Masters program. I may sound like a serial paper chaser but I do find that it is not exactly what I wanted. After meeting a few successful entrepreneurs and reading about them, I got motivated to start a business or several businesses. Instead of getting an MBA, why not start a business and learn from it? Learning from the school of Hard Knocks could potentially produce better results and may cost less. Don’t get me wrong, an MBA program can be good because they are structured to teach various important subjects. Most importantly, you have to finish the program within a predetermined time frame.

I have quite a variety of interests and have invested in programs and seminars on self improvement, real estate, stocks and options. My main idea is to create a time-bound program to explore these various areas. For example, setting a time frame of 3 years to learn and apply specific real estate investing techniques or learning and investing in stock options successfully. The grand plan is to create many 3 year programs that people from all walks of life can follow and apply to be successful. These programs will be available as services that can be sold and marketed in various forms. I view these programs as an alternative to the regular MBA program. No degrees will be conferred but the experience gained will be as valuable if not more.

Fast forward to the present situation, according to Michael Masterson, I will need, “Real-Estate together with Stocks and Small Businesses”, to achieve the 40% Annual Compounded Growth Rate needed to reach the number.  That is almost exactly what I’ll be doing in the next few years.

In the area of real estate, I’m going to start investing in Tax Liens in a few targeted states. The goal is to make profit from these investments and also to hold a few properties as income producing assets. The main benefit from this activity is that it is not a year round effort since tax lien auctions are held periodically depending on which state you are investing in. The low periods can be used to pursue other activities like investing in stocks and stock options. For income producing properties, the management should be off loaded to property management company. All these activities will be recorded and organized so that I can create the various 3 year programs that can be sold as services.

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