How I Became a Penniless Millionaire

by Stephen Day

Recently, my wife Tahmina asked how I felt when I earned my first million dollars.  When I told her, she could not stop laughing.

How it happened

Back in the 1980s, I was working as a junior partner with a real estate development firm based in Maryland. We were building a small office/retail center in Orange Park, Florida. I was not only the project manager, I was the construction superintendent, the leasing agent, the landscaper, the zoning director, and doing…well, everything.  We were seeking both a construction loan and a permanent mortgage for the 2nd building and I was in charge of the loan acquisition as well. 

I had never put together a loan package for a large lender before and I was struggling to understand all that needed to be included.  (We see the same confusion in the new startups we review for DAYCAP.)  I had approached the local banks, the large national banks, and other funding sources. I was asking everyone. Wait, that is not quite accurate. I was groveling with everyone to get the loan. 

So, I am sitting in my construction trailer on a very hot Florida day, lime rock dust from the new parking lot covering me and I was looking at my worn-out tires on my car, one of which had been flat that morning.  I had to get a whole set of new tires. But I had NO MONEY.  Really!  NO MONEY.  I had no idea where I was going to get any more money until the first building was given its certificate of occupancy and that loan would be closed. However, that could take two more months and I really needed to get the 2nd building’s financing in place so we continue construction.

That afternoon, as I sat sweltering in my construction trailer, pleading with various lenders, our CPA stopped by with the financials and the loan package to present to the big insurance company that was our best bet for funding.  We chatted a bit while I was taking calls from contractors and then he left.  Maybe an hour later, I opened the file with financials, which included my personal financial statement. 

I could not believe my eyes. I had to read this again.  According to the CPA’s review, my net worth (based upon the value of the real estate project) was now over one million dollars.  I was a millionaire!  It was just incredible.  And it was NOT how I thought I would feel when I got to that “mark of success”.  Just imagine how I felt, a millionaire with NO MONEY, sitting in a hot construction trailer and unable to buy a new set of tires. Not exactly Mr. Big Shot.

I suddenly learned that the movie/television version of the debonair millionaire was often quite different from the reality. Yes, on paper I was a millionaire. Only on paper.  But I did not have ready, available cash.  As is often the case with business owners, our wealth is tied up in our business enterprises, and not readily available for spending.  

What I learned

I came to realize that there are many folks like me, penniless millionaires, many who have assets, land or businesses worth millions, yet do not always have available cash resources.  One such businessman once told me, “Sure, I guess I could afford a $350K Bentley but I can hire seven people with that money.  That is seven families that will receive $50K per year, still a pretty decent living for many people.” I loved his mindset, as I did when another said over a Barbeque lunch, “Instead of spending $100 on an expensive bottle of champagne, why not buy one share of IBM.  Which do you think will give you longer pleasure?” 

I have learned to greatly value the people who are building assets quietly without all the show.  Many of them have to really consider the expense of a cruise or a vacation to an exotic locale.  But they are on their own wonderful adventure. We can learn much from them.

By the way, I did finally get a new set of tires, but I had to wait a couple of months.  On that day, I spent three dollars to fix my flat tire.  After all, what else would you expect a millionaire to do?

Posted on August 3, 2016 .