September 2, 2013
By: Bobby Casey, Managing Director
A few days ago, I was chatting with a good friend of mine and, as usual, the topic of entrepreneurship and wealth came up.
My friend has had a very interesting life: living in a couple of different countries, traveling the world, and working on some interesting projects. Now, he has decided he wants to start his own company.
Which led to the topic: “How to get Rich”.
I told ‘Mike’, there are three very important secrets to getting rich. The first is to provide so much value to others that they are compelled to pay you for your products and services.
Of course that is a bit simplistic and doesn’t really provide the answer to enduring wealth, but without providing value, you are merely chasing money. You will NEVER, EVER acquire wealth chasing money.
A friend of mine, MJ Demarco, wrote a book title, “The Millionaire Fastlane: Crack the Code to Wealth and Live Rich for a Lifetime”. In this book, makes a distinction between chasing value vs. chasing money. There is a huge difference. Take a look around you. What do most people do on a daily basis? What are most people concerned with? Money, money, and money.
They are chasing money. Very few people are chasing value and thus very few people acquire wealth. I don’t want to rehash MJ’s book, but I do highly recommend it. The lesson to be learned here is:
Chase Value, Not Money
I remember when I was 21 and starting my first ‘real’ business. I waled through a local Walmart and I met a man in the outdoor garden area. He had on what appeared to be some sort of uniform. He was assembling bicycles.
I asked him if he could tell me where I could find the garden tools. He quickly and politely informed me that he was not an employee of Walmart, only an outside contractor hired to assemble their bicycles.
I WAS FASCINATED!
Not because I had a secret urge to assemble bicycles, but because I looked around and there were hundreds of them. And thousands of Walmart stores. This looked like a goldmine.
So we chatted for a few minutes and before leaving I got the man’s phone number. Later in the week we talked on the phone and I asked him about starting a similar business with me. (I was blissfully ignorant about business – one of my greatest qualities at the time…)
He declined, but I ended up a few weeks later getting a job with his employer. I worked for this employer for less than 2 months and the situation deteriorated with the company so I set out on my own.
Within 3 years my company was assembling bicycles at Walmart and Toys R Us stores in North Carolina, Virginia and West Virginia earning over $1M per year.
With more than one dozen people employed as assemblers, I learned a very valuable lesson that I shared with my friend, ‘Mike’.
Leverage Time to Achieve Wealth
In that company, I was leveraging time. By hiring people, I was duplicating my efforts and thus leveraging time.
I could personally only assemble 30-40 bicycles in a day. But 10 people could assemble 300-400. Well, if 10 people were good, then 100 people would be even better (disregarding the management issues of course).
As a young entrepreneur I had no money and no real connections with people who had money so I had no other choice but to leverage time, and thus people.
The company was adding value in a huge way. We provided a service to Walmart by rapidly and efficiently building bicycles for their clients. We provided well-paying jobs to workers who were looking for this type of employment.
We were chasing value and leveraging time.
As the business matured, my earnings and wealth grew. Having grown up in a construction and real estate family, I was always aware of investing in real estate and other assets. So with my growing wealth, I decided it was time to put my money to work for me.
This led to my discovery of the third secret to wealth:
Leverage Money to Achieve Wealth
Of course at this stage, most people have acquired some level of wealth and the leveraging of money is used to not only achieve wealth, but grow the existing base as well.
This was the point in my life where I decided to educate myself on investments. My first real investment was to buy the office building which housed my company.
At the time my company was using 1000 square feet of this 4000 square foot building. I bought the building for $400,000. Each of the four tenants — my company included — paid $1000 per month in rent on a triple net lease. This gave me a 12% yield on an asset I controlled and owned through my new burgeoning real estate company.
This 12% yield amply covered my mortgage payment and other expenses, actually leaving me with a 3.6% cash yield on purchase price. But, even better, I used leverage via bank financing with 10% down, giving me an annual cash yield of 36%! I made a few other real estate deals with similar outcomes that really solidified the principle of leverage. Now my money was making money for me.
During this time, I continued to educate myself on investments and became very interested in the stock market. As an entrepreneur, I respect other business people who started companies and provided value to their clients.
I took the entrepreneurial perspective as an investor and looked for companies that did interesting things and were run by smart entrepreneurs.
Also during this time, I saw some irrational behavior in the real estate sector, so beginning in 2007 I started selling my properties. Aside from a house, I sold all real estate with the last property closing in September 2008. Good timing eh?
As an avid reader and perpetually curious person who was studying the markets, it also seemed there were some cracks in the foundation of the equities markets, so I moved most of my investments into US treasuries in 2008. That was clearly a good decision.
Post 2008 crash I could then see an enormous amount of fear, much of it irrational, in the equities markets so I pinched my nose, held my breath and dove in. I started selling naked put options on high quality equities near the bottom of the market where fear was at its peak.
Side bar: For those of you that don’t understand option trading, we will be offering a tutorial in our upcoming GWP Insiders newsletter. You can click here to get on the early notification list.
I will go into further detail later this week about a recent option trade so you can see how lucrative this really can be. This really is one of the greatest income secrets of the wealthy.
Back to my conversation with ‘Mike’… he asked me what I was doing now for business and investments.
I told him we are continuing every day to add value to our readers and clients through our free newsletters. We strive every week to enlighten, educate and entertain you with our unconventional ideas. (If you feel we are doing this well, let me know. Or if you feel we are failing miserably, also, please let us know.)
The numbers don’t lie. We have over 60,000 subscribers receiving our free newsletters every week and the subscriber base is growing every week. Someone likes what we have to say.
In our asset protection and corporate services business, we are helping clients, like you, protect your wealth through asset protection strategies. Our corporate services business is growing as we continue to provide trusts, foundations, offshore companies and bank accounts for clients around the world.
Our team is constantly looking for the best options for you to maintain your privacy, protect your wealth, and find ways to invest internationally. (If you want to set up a consultation, please contact us here.)
Our conference business continues to thrive by gathering our Rolodex of offshore experts to educate our attendees about asset protection, offshore banking, international investments, 2nd residency and passports, privacy and much more. (If you want to join us next month, September 18-22 in Bocas del Toro, Panama, click here to learn more.)
And, personally, I am investing in good companies that treat shareholders well. I am selling options to leverage my returns. I am buying precious metals as a store of value.
I’m also buying cash flow foreign real estate. Currently we have a couple of projects in Eastern Europe where you can invest in cash flow producing properties and possibly even acquire permanent residency. If you are interested send me a private email here.
Until next time, live well.
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