What does it take to be a top 1% -er.....

Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes

http://www.usfunds.com/investor-library/frank-talk/what-does-it-take-to-be-in-the-top-1-percent-not-as-much-as-you-think/#.VJbSI8BE4

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Jon Klaus

Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes

11y

The key, at least to satisfaction and contentment: "What matters most is being grateful for what you have. I’m a big believer that wealth is not a number or an amount, it’s an attitude and the umbilical cord to attitude is gratitude."

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Aaron Mazzrillo
Investor · Riverside, CA · Member since 2011 · 2k+ posts · 3k+ votes
11y
I think measuring yourself against anyone else to figure out what your worth is, in terms of class, as in a 1%er or not, is a complete waste of time and irrelevant to anything other than marketing companies. No matter how much you have, Mr. Jones will always one up you. That's his and his wife's job. No matter what you buy, they will buy something better. In my lucky 13 years of living, working and building my portfolio here in southern California, I've personally seen more people than I can count reap huge incomes only to lose it all. Let's say you make $600K a year. What 'class' of people does that put you in if you spend $610K a year? Top 1% of morons. Few examples;
I know a guy who lost a large window manufacturing company built by his father. His kids never experienced a shortage of days in Havasu, new boats, big trucks, etc. At least not up to the BK.
Another guy owned two companies. He had a Lamborghini (he gave me a ride in it and it was horrible) and even built a go kart track for his kids that went around the perimeter of his house, which was huge. He lost it all. One of his best friends, who lived in a bigger house and one time bragged to me how his water bill alone was $800/month. He needed to water the mature palm trees he had put in his yard, because he wouldn't be able to enjoy young palms for several years. The former guy told me that guy stole quite a pile of money from him for an 'investment' that was guaranteed to be a great return.
Another guy had several hundred houses and apartment units. Gone. All of it. I'm pretty sure he may be facing some legal issues and one of his partners already filed BK.
I have more stories, but you get the point.
It isn't what you make. It's what you keep. Build assets that produce income which will replace you as the income earning for your household and don't bother trying to keep up with the Jones.
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James Park
Real Estate Broker · Johns Creek, GA · Member since 2009 · 870 posts · 664 votes
11y
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Kalyb Coats
Contractor · Casper, WY · Member since 2014 · 36 posts · 12 votes
11y
I'll tell you what, Ive lived a lot better making 50 to 100k than I do at 200 to 300k. taxes being one reason. but just the sheer amount of hours and time away from family and friends is what takes away from life. If your making that big money and your in the "1%" I sure hope your doing something you love and its a passive income stream, because if not you might as well be broke. (as I sit out in the middle of Wyoming doing the exact thing im saying not to do ha ha ha )
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Peter MckernanBusiness Member
Residential Real Estate Agent · Irvine, CA · Member since 2013 · 2k+ posts · 1k+ votes
11y
@Aaron Mazzrillo about working hard!
If you work hard at something that you love and have the passion coupled with the drive you will be successful. There should not be an ultimate goal set for a certain amount of money that needs to me made, or be motivated externally. A person's motivation should derive from internal needs (i.e. job fulfillment, life satisfaction, or educational accomplishments). Whatever captures one's motivation and passion for a career that's challenging should be what is pursued.
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Chris Martin
Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
11y
*IF* I were in the 1% on the income side... and not the 0.5% (*separate issue there)... to a large degree because of taxes, I'd be trying hard to get out of the 1%.
Example: $100K F&C RE asset. $82.5K is the improvement, $17.5K is the land. Rent for $1000/month, and $500/month collective average expenses over the life of the asset. "Income" is $6000 per year but because of depreciation taxed as $3000. And reality is that cash flow could be (well) above $6000 because some of that 50% is based on items (like vacancy, management) that you can somewhat control and minimize and some you can defer to later.
(*) If I were in the 0.5% (the really top end, e.g. google founder stock) then I'd focus on issues at a completely different level. These type really do have a local societal influence.
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Aaron Mazzrillo
Investor · Riverside, CA · Member since 2011 · 2k+ posts · 3k+ votes
11y
Figure out what you spend over the course of an entire year. Divide that number by twelve. Passively earn that amount each month + 10% for surprises and the rest is, as the guy who taught me the business likes to say, all scoreboard.
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Pavel Sakurets
Investor · Minneapolis, MN · Member since 2014 · 332 posts · 74 votes
11y
Originally posted by @Aaron Mazzrillo:

I think measuring yourself against anyone else to figure out what your worth is, in terms of class, as in a 1%er or not, is a complete waste of time and irrelevant to anything other than marketing companies. No matter how much you have, Mr. Jones will always one up you. That's his and his wife's job. No matter what you buy, they will buy something better. In my lucky 13 years of living, working and building my portfolio here in southern California, I've personally seen more people than I can count reap huge incomes only to lose it all. Let's say you make $600K a year. What 'class' of people does that put you in if you spend $610K a year? Top 1% of morons. Few examples;
I know a guy who lost a large window manufacturing company built by his father. His kids never experienced a shortage of days in Havasu, new boats, big trucks, etc. At least not up to the BK.
Another guy owned two companies. He had a Lamborghini (he gave me a ride in it and it was horrible) and even built a go kart track for his kids that went around the perimeter of his house, which was huge. He lost it all. One of his best friends, who lived in a bigger house and one time bragged to me how his water bill alone was $800/month. He needed to water the mature palm trees he had put in his yard, because he wouldn't be able to enjoy young palms for several years. The former guy told me that guy stole quite a pile of money from him for an 'investment' that was guaranteed to be a great return.
Another guy had several hundred houses and apartment units. Gone. All of it. I'm pretty sure he may be facing some legal issues and one of his partners already filed BK.
I have more stories, but you get the point.
It isn't what you make. It's what you keep. Build assets that produce income which will replace you as the income earning for your household and don't bother trying to keep up with the Jones.
Well said. 15 years ago when I came into the USA from Belarus, I was telling my friends in Belarus that I was making 2-3k/months while they were making $200/month. And only one person asked me this question : Pavel, I don't need to know how much you make, I want to know how much you could save and back then I was only able to save $200-$300/month.
I don't care how much top 1% makes if they spend it all, file foreclosures and become bankrupt after their ''Hollywood or Sport carrier is over''. I believe that true wealth is a net worth if you have a huge $ of cash (and hoping that it will not be eaten up by inflation). Don't believe in net worth in RE either, I've seen my net worth declined by 5 times in 2008, because I had a lot of ''equity''.
I only believe that true wealth is a future cash flows discounted at desired rate of return
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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
11y
"You can take that money, buy a nice house in Raleigh, and never have to work or worry about money again."
I disagree with this statement.
I have clients I work with that are in the top 1/2 of the one percent. Those that have money worry about keeping it. Those that do not have it worry about trying to find a way to get it.
Stress doesn't go away it just changes as your life does. That kind of wealth there is a lot of estate planning and legacy issues clients worry about. They put fail safes in so when they are gone the kids etc. can't blow all the money at once and make stupid choices.
When you get 60,70,80 etc. you still worry about health whether you have money or not. Money is not the cure all to life like some people think it is.
Cash flow is important. The cash flow from investments is more important than the income from your work as that can by cyclical.
I am doing as many transactions as I can while my cycle is doing well and make investments. The cash flow can be there when the market cycle changes and velocity of transactions drop.
Even if you are in the 1% you worry about inflation, taxes, government policy etc.
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Chris L.
Investor · Fort Wayne, IN · Member since 2009 · 391 posts · 257 votes
11y
If your goal is simply to make the top 1%, you are not likely to be satisfied in the long run.
One of my favorite financial bits of wisdom was written 3 centuries ago:
Prov 23:4-5 “Do not weary yourself to gain wealth, cease from your consideration of it. When you set your eyes on it, it is gone. For wealth certainly makes itself wings, like an eagle that flies toward the heavens.”
I do recommend that everyone strive to be financially independent from a job. (Defined as your passive income being greater than or equal to your required expenses.)
When you no longer need a job, you are free to pursue what you are truly passionate about.
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Amit M.
Rental Property Investor · San Francisco, CA · Member since 2013 · 1k+ posts · 1k+ votes
11y
While you contemplate the wisdom and life philosophy behind wealth, have fun with this net worth rich-o-meter :)
http://graphicsweb.wsj.com/documents/PERCENTMETER1...
Note that you can set it to either income or wealth.
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Dawn BrenengenBusiness Member
Moderator
Real Estate Broker · Raleigh, NC · Member since 2014 · 2k+ posts · 1k+ votes
11y
@Joel Owens I didn't say people with 8 million buy a nice house in a small city and live carefree afterwards. I'm saying that they CAN.
I understand what you mean. I actually worry more about money now than I ever did too, even though I have much more than I ever did. Along with my higher income came higher expenses, tax planning and estate issues, two kids and more investments to track. It's more stuff to think about because I have more options. If I didn't have any money, these things would not be issues.
That being said, If I had 8 mil in the bank, I would see a lawyer, get a good estate plan set up, sell my rentals, invest my money in low risk funds, live off the dividends, and spend much more time with my family. At a 4% SWR, I would still bring in 320k/year, which is way more than I need to be happy and carefree.
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Joel OwensBusiness Member
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Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
11y
What most due is they do not put in all low return funds. With inflation the money is devalued year over year so you still want maximum return but in a safe way. 8 million today would be devalued heavily in 10 to 20 years.
Most of my clients with commercial real estate are very happy with 10 to 15% coc returns annually. They are happy if they are getting 2 to 4 times over inflation each year for return.
You start going higher than that and you get into mom and pop tenants, value add, etc. etc.
The portfolio is generally split out into many different investments carrying various levels of risk. The overall blended return is double digits. The highest risk stuff is only a small percentage of investment.
Where I see investors get into trouble is say their total net worth is 400,000 and then want to bet 350,000 onto a value add property. It's either win big or lose it all. Conversely if someone is sitting on 5 million and they take 350,000 and put it into a value add project and it drops to 250,000 and they lose 100,000 the 4 mill plus leftover will take not much time at all to generate that loss back into a gain.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
11y
I had a business associate who was raised in Manhattan he moved to Portland because in his estimation he needed to make about 1 million a year before tax to live a comfortable lifestyle there and have the necessary accompaniments.. IE Parking space, Dog walker , Private school ( 2 kids),, town car service.. Tip door man, 15 k a month apartment.. etc etc.
Income in my mind is totally regional..
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Joel OwensBusiness Member
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Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
11y
Here in GA you can live like a king for very little. We have some of the best affordability in the country for quality of life.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
11y
@Aaron Mazzrillo
Aaron your really making me feel bad my water bill in the summer is almost 500 a month.. but that is only 4 months the rest of the time its 50 bucks !!!
This is fun.. and subjective of course.. what's important to one person may not be to another.. and wealth transferred without earning it is one thing.. most the guys I know that have that wealth also have trustee's t make sure they don't blow it ... LOL
But can't blame them for inheriting it.
Us guys that came from nothing and have done better than average and that's what I think of most of us guys in the RE bizz.. well its nice and great an all.. but then we all have our things. There was a thread on BP ( I bought a Lamborghini) and that got a ton of play like that was some right of passage or something that proved one had made it.
And your right plenty of f up's lose it all. and plenty of folks that were good folks got killed in 07 to 2011 GFC.. lots of short memories these days.
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Aaron Mazzrillo
Investor · Riverside, CA · Member since 2011 · 2k+ posts · 3k+ votes
11y
Originally posted by @Jay Hinrichs:

@Aaron Mazzrillo
There was a thread on BP ( I bought a Lamborghini) and that got a ton of play like that was some right of passage or something that proved one had made it.
Not 100% sure, but I got the strong feeling a lot of that was daddy's money. Maybe not directly, but probably daddy's effort to create the pile.
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Andrey Y.
Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
11y
Originally posted by @Joel Owens:

"You can take that money, buy a nice house in Raleigh, and never have to work or worry about money again."
I disagree with this statement.
I have clients I work with that are in the top 1/2 of the one percent. Those that have money worry about keeping it. Those that do not have it worry about trying to find a way to get it.
Stress doesn't go away it just changes as your life does. That kind of wealth there is a lot of estate planning and legacy issues clients worry about. They put fail safes in so when they are gone the kids etc. can't blow all the money at once and make stupid choices.
When you get 60,70,80 etc. you still worry about health whether you have money or not. Money is not the cure all to life like some people think it is.
Cash flow is important. The cash flow from investments is more important than the income from your work as that can by cyclical.
I am doing as many transactions as I can while my cycle is doing well and make investments. The cash flow can be there when the market cycle changes and velocity of transactions drop.
Even if you are in the 1% you worry about inflation, taxes, government policy etc.
While I agree 100% that cash flow is important, you mentioned that income from your worlkcan be cyclical.. hmm do you really think so? Most people (actually everyone) I know with a W-2 income, makes more per year the older they get. Part of this is due to seniority, further specialization, and experience.
Perhaps if you are a RE agent, stripper, etc. that may be cyclical but the average job, you tend to make more the older you get.
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Roy C.
Rental Property Investor · NC · Member since 2014 · 132 posts · 40 votes
11y
Interesting example choices for cyclical job.... not sure how you were able to come up with that..
I do agree with you about the average job. You tend to make more the older you get because you gain more experience (hopefully). Once things get repetitive and you feel like your job is not challenging enough because you have been doing same thing for last ten years, then maybe it is time for you to find jobs that you can learn something new. Move laterally is what I am trying to say here, because I believe that life is a continuous learning process.
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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
11y
Andrey a large majority of jobs these days are unstable. Every five years or less a large majority of the population changes jobs.
High level jobs can get consolidated as companies go out of business or downsize.
People are then over qualified for the lower paying jobs that exist in the marketplace. Jobs are not like when my parents worked and you give your heart and soul and a company takes care of you with a nice retirement. That is almost non-existent today. Pensions and benefits are severely slashed.
So my point to people is tomorrow your job you were so secure with regardless of how much money you make could be gone. That versus investments throwing off cash flow (if you bought right) month after month.
Now are investments 100%?? No nothing is 100% with any kind of investment but it is a more predictable income stream than jobs these days. The demands of these high paying jobs are cyclical. Many are tied to contracts of a few years etc.
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Dawn BrenengenBusiness Member
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Real Estate Broker · Raleigh, NC · Member since 2014 · 2k+ posts · 1k+ votes
11y
I think this is the first time I've ever seen my job in the same sentence with "stripper". Not sure how I feel about that.... ?
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Aaron Mazzrillo
Investor · Riverside, CA · Member since 2011 · 2k+ posts · 3k+ votes
11y
Originally posted by @Dawn Brenengen:

I think this is the first time I've ever seen my job in the same sentence with "stripper". Not sure how I feel about that.... ?
I bet the average stripper makes more than the average agent. Stripping is pretty straight forward. Doesn't take any brains to figure out how to get to the dollars. Unfortunately, most agents approach their work in the same fashion - they go about it not using their brain. Want a simple test? Call 10 local agents and see how many actually answer the phone. My guess is 2 or less. Of the 8 you leave voice mails for, I bet 3 or less call you back and 2 of those won't be within the first 24 hours. The average agent is all about getting listings, then living on the put, put, pray method - put a sign in the front lawn, put it in the MLS and pray another agent comes along with a qualified buyer.
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