I feel that telling Bob Rogers the truth would be unfair to him. All he wants to do is give me good financial advice, not become my psychiatrist. That’s what this blog is for. In fact, I’m gonna try something. I’ve had enough meetings with Bob to guess what his advice would be if he knew everything. So I’m going to make a mock conversation between he and I right now. Maybe I can learn something from this.
I’ll start the conversation at the point just after I tell him everything about me:
Fake Bob: Okay. Well that certainly changes things and I can understand where you’re coming from.
Me: Yeah. So now you see why I can’t work at these jobs for much longer. I gotta get out of this. The more I stay at these jobs the angrier I get at these mongrels.
Fake Bob: Here’s my question to you then: What if you’re wrong? What if you live to see 40 and 50 and 60, and you’ve now put yourself at a disadvantage. With jobs, it’s much easier to get a mortgage and acquire properties faster. There are so many doors that get shut when you don’t have a W2, and that’s means you’re limiting yourself in retirement. If you want to buy another property post-retirement, you’ll either have to come up with the cash yourself or get mortgage loans from hard money lenders who’ll charge double or triple the standard interest rate.
Me: But I don’t think I’m wrong. And, even if I were, the thought of paycheck retirement is the only thing keeping me going. If I knew that I would have to work these shitty jobs for 8 more years, I’d be BEGGING for my cancer to return.
Fake Bob: I understand. I just want you to be aware of the consequences. You’ll basically be giving up millions of dollars in net worth. You can be 40 years old and a multi-millionaire, or 37 years old and worth about 300K.
Me: I know, but I choose to look at it a different way. Running the numbers, that 300K is all equity. I look at it like a bank, where I’m putting in 300K and it gives me a return of $45,000 a year after taxes. That’s a 15% return on my investment every year for life. And, should I want to buy more properties, I can go the foreclosure route and buy a cheap one, fix it up, and rent out to some immigrants.That's an extra 8K to 10K a year.
Fake Bob: But you see how limiting that is, right? Let’s take Property 1 for example. It’ll take $50,000 to pay it off, after which you’ll be making $5,000 more every year. Right?
Me: Yeah.
Fake Bob: Now, let’s take that $50,000 and put it towards a 4 unit property going for $150,000. Even with a mortgage, you’ll be netting at least $700 per month and $8400 a year. That’s $3,000 more every year, and you’re increasing your net worth by much more.
Me: But look at the new risks I’ll be taking. That’s yet another mortgage. That’s 4 more sets of tenants I’ll have to manage. That’s a greater chance of turnover increases and repairs, both negative variables. It’s easier to get the $5,000 a year than the $8,400. I would have to work harder, take more risk, and for $3,000 more a year? It just doesn’t look like it’s worth it.
Fake Bob: I see. So for you the workload is a huge factor.
Me: Everything’s a factor, including workload. Right now I manage 10 units when I add my mom’s property. I don’t really do much work, as I simply take care of a problem by calling a handyman. So I’ll basically be making calls and that’s about it. Maintenance-wise, I’ll mow the lawns every two weekends, saving me money. And the tenants take care of their own snow removal, but I sometimes do if I feel like it.
Fake Bob: Alright. Well look, your plan to pay off the mortgages is perfectly legitimate, and will obviously get you what you want by the middle or the end of 2018. I’m not going to say it’s a bad idea because it’s not. And it’s an idea that’s tailor-fitted to suit your needs. But I wouldn’t be advising you fairly if I didn’t let you know the other side of the coin, and how much money you’ll be leaving on the table. Most investors would rather use the tenant’s money rather than their own to do all this. But I get where you’re coming from with your “issues”.
Me: Cool. And I definitely appreciate all your help. Thanks again.
Fake Bob: No problem!
Wow. Wow wow wow! That was… wow! That went so much better than I expected. I learned about as much from the fake Bob as the real one! I think I’m gonna start doing this from now on. I know that it’s bad to further isolate myself by creating people instead of getting advice from real ones, but I can’t help it sometimes. I’ll probably see Bob Rogers (the real one) one more time just to give him an update. Then I’ll have to give him a gift of appreciation or something. Rich people like to give each other notes (I learned that from Howard Stern), so I’ll probably buy an empty card and write him a good thank you note. A guy in my position can’t offer a guy like him much, but appreciation is always welcome. And my choice appears to be clear: pay off the mortgages and live out my days in moderate peace.
I’ll start the conversation at the point just after I tell him everything about me:
Fake Bob: Okay. Well that certainly changes things and I can understand where you’re coming from.
Me: Yeah. So now you see why I can’t work at these jobs for much longer. I gotta get out of this. The more I stay at these jobs the angrier I get at these mongrels.
Fake Bob: Here’s my question to you then: What if you’re wrong? What if you live to see 40 and 50 and 60, and you’ve now put yourself at a disadvantage. With jobs, it’s much easier to get a mortgage and acquire properties faster. There are so many doors that get shut when you don’t have a W2, and that’s means you’re limiting yourself in retirement. If you want to buy another property post-retirement, you’ll either have to come up with the cash yourself or get mortgage loans from hard money lenders who’ll charge double or triple the standard interest rate.
Me: But I don’t think I’m wrong. And, even if I were, the thought of paycheck retirement is the only thing keeping me going. If I knew that I would have to work these shitty jobs for 8 more years, I’d be BEGGING for my cancer to return.
Fake Bob: I understand. I just want you to be aware of the consequences. You’ll basically be giving up millions of dollars in net worth. You can be 40 years old and a multi-millionaire, or 37 years old and worth about 300K.
Me: I know, but I choose to look at it a different way. Running the numbers, that 300K is all equity. I look at it like a bank, where I’m putting in 300K and it gives me a return of $45,000 a year after taxes. That’s a 15% return on my investment every year for life. And, should I want to buy more properties, I can go the foreclosure route and buy a cheap one, fix it up, and rent out to some immigrants.That's an extra 8K to 10K a year.
Fake Bob: But you see how limiting that is, right? Let’s take Property 1 for example. It’ll take $50,000 to pay it off, after which you’ll be making $5,000 more every year. Right?
Me: Yeah.
Fake Bob: Now, let’s take that $50,000 and put it towards a 4 unit property going for $150,000. Even with a mortgage, you’ll be netting at least $700 per month and $8400 a year. That’s $3,000 more every year, and you’re increasing your net worth by much more.
Me: But look at the new risks I’ll be taking. That’s yet another mortgage. That’s 4 more sets of tenants I’ll have to manage. That’s a greater chance of turnover increases and repairs, both negative variables. It’s easier to get the $5,000 a year than the $8,400. I would have to work harder, take more risk, and for $3,000 more a year? It just doesn’t look like it’s worth it.
Fake Bob: I see. So for you the workload is a huge factor.
Me: Everything’s a factor, including workload. Right now I manage 10 units when I add my mom’s property. I don’t really do much work, as I simply take care of a problem by calling a handyman. So I’ll basically be making calls and that’s about it. Maintenance-wise, I’ll mow the lawns every two weekends, saving me money. And the tenants take care of their own snow removal, but I sometimes do if I feel like it.
Fake Bob: Alright. Well look, your plan to pay off the mortgages is perfectly legitimate, and will obviously get you what you want by the middle or the end of 2018. I’m not going to say it’s a bad idea because it’s not. And it’s an idea that’s tailor-fitted to suit your needs. But I wouldn’t be advising you fairly if I didn’t let you know the other side of the coin, and how much money you’ll be leaving on the table. Most investors would rather use the tenant’s money rather than their own to do all this. But I get where you’re coming from with your “issues”.
Me: Cool. And I definitely appreciate all your help. Thanks again.
Fake Bob: No problem!
Wow. Wow wow wow! That was… wow! That went so much better than I expected. I learned about as much from the fake Bob as the real one! I think I’m gonna start doing this from now on. I know that it’s bad to further isolate myself by creating people instead of getting advice from real ones, but I can’t help it sometimes. I’ll probably see Bob Rogers (the real one) one more time just to give him an update. Then I’ll have to give him a gift of appreciation or something. Rich people like to give each other notes (I learned that from Howard Stern), so I’ll probably buy an empty card and write him a good thank you note. A guy in my position can’t offer a guy like him much, but appreciation is always welcome. And my choice appears to be clear: pay off the mortgages and live out my days in moderate peace.
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