When Whole Life Insurance is a Scam

There are circumstances where whole life insurance is a scam.

I’ll tell you what they are.

I get nervous what I see Whole Life Insurance pitched as a good investment. 

One of the most questionable sales tactics I’ve seen is saying the returns are superior to traditional retirement account investing.

They suggest foregoing, or even liquidating traditional retirement accounts to quickly fund whole life insurance policies.

I’ve even seen this outrageous advice given in (questionable) military real estate groups.

When whole life is sold under these conditions, it’s a scam.

It is dangerous and wrong.

You will lose out on millions over a lifetime.

Today I’ll discuss what whole life insurance salesmen aren’t going to tell you about this complicated and expensive investment.

While there is a small need for something like whole life for high net worth individuals with unique circumstances (I’ll talk about this at the end), to say this is an appropriate investment for the average joe or typical military member or veteran is flat out irresponsible.

The strongest advocates of whole life insurance, which as far as I can tell are only the people who sell it, claim it is a better investment than the stock market or retirement accounts.

This is flat out wrong. I’ll explain the math below.

The people that are pitching this crap have no training in finances or investing.

They are, unfortunately, trained in sales and marketing. 

Their commissions are among the highest in the industry.

Term Life Insurance Defined

If you want to understand what whole life insurance is, you need to first know what the much more common and useful term life insurance is.

whole life insurance

from Unsplash.com

This is probably what you are already familiar with, and for most people, this is insurance that is worth having.

Read moreWhen Whole Life Insurance is a Scam

3 Secrets to Get Rich in the Military

At RichonMoney.com, we try to provide accurate information on personal finance, investing, and real estate, but it may not apply directly to your individual situation. Please see our disclosure.

BLUF:  I made a lot of money while I was in the military, gaining millionaire status well before my recent retirement at 20 years in. 

I’m visiting a friend in Hawaii right now. We have a lot in common.

He retired from the Navy 20 years ago.

I retired from the Air Force 5 months ago.

Like me, he retired financially independent and never worked again.

He spends his days surfing, hanging out with friends, and traveling.

What we did, anyone can do while they’re in the military.

rich in the military
This is not me or Doug!

We both had enough money saved up to never work again.

I’ll show you the exact steps we used to get rich in the military.

Getting rich in the military requires a different strategy than the average civilian. There are unique challenges we face for both how to invest and how to buy real estate.

Getting rich in the military can be boiled down to doing three things correctly:

  1. Saving Money while in the Military
  2. Investing while in the Military
  3. Real Estate while in the Military

I’ll talk through the specifics of each step then reveal at the end which one is by far the most important.

Let’s dig into this.

1.  Saving Money while In the Military

The secret to saving money in the military is to grow the gap.

What the hell does that mean?

Growing the gap simply means expanding the distance between how much you spend and how much you earn.

Read more3 Secrets to Get Rich in the Military

Estimate Rental Expenses Like the Best Investors

estimate rental expenses

I will show you exactly how to accurately estimate rental expenses.

Don’t be the investor who believes the rental expenses he’s given from the property seller!

Intro to Estimating Rental Expenses

I will give you formulas and methods to make accurate estimates even if you don’t have someone local in the area you can compare notes with.

There are several different methods for doing this. I’ll let you know which work best.

The ideal situation for accurately estimating expenses is to get the information directly from another investor that has rentals in the same area as you. 

You can find these people through local clubs like a real estate investing association (REIA) or other investing group.  Often these groups are on Facebook. You can find by searching key terms such as REIA or real estate investing and the name of your city.

If you can’t find investors that will help, talking to property managers is the next best thing.

Whether you get information from these people or not, it is still a good idea to use the tools here to make sure their rental estimates make sense.

Maintenance and Repairs

Maintenance and repairs are variable costs. These are difficult to predict and change often.

There are several “rules of thumb” that can help you estimate what repairs will be.  I’m gonna break them all down for you, and tell you my favorite:

  • The 1% Rule for Expenses
  • The Square Footage Formula
  • The 5X Rule
  • The 5% Rule
  • The 50% Rule

Repairs are the most underestimated and neglected rental expenses in real estate investing.

Here are the rules to help estimate them:

1% Rule for Expenses

Don’t confuse this 1% rule with the more common 1% rule for rent. (Rents should be at least 1% of purchase price)

1% Rule for Expenses Definition: Maintenance and repairs will cost about 1% of the property value per year. 

A property valued at $100,000 should cost $1,000 a year for repairs on average.

Pros: Easy to do in your head. Accounts for higher prices in high cost of living areas. Labor and supplies cost more in these area.

Cons: Not accurate on older properties under $100,000

I can tell you from personal experience owning 30 properties with an average cost of $75,000 each, this isn’t accurate at the low end of home prices.  

Often when you find a property that cash flows well under $100,000, it is going to be a bit older and comparatively in worse condition.  These two traits make repair prices higher. 

From my experience, a 1.5% calculation off purchase price would be more accurate for run down properties purchased under $100,000.

Square Footage Formula

Plan on $1 per square foot for yearly maintenance costs.

A 1,000 sq ft home should cost about $1,000 in maintenance per year

Pros: More conservative than 1% rule above. Makes sense that larger homes have more costs due to increased area.

Cons: Does not accurately account for cost of living differences.

My average costs for repairs in Montgomery, AL are a lot lower than those in high cost of living areas (HCOL) like San Diego or Honolulu. This rule doesn’t account for those differences on the same size house.

Labor and supplies will cost more in high cost of living areas.  To estimate rental expenses, adjust as needed.

5x Rule

Yearly maintenance costs will be approximately 1.5 times the monthly rental rate.

If your home rents for $1,000 a month, the estimate should be about $1,500 a year.

I’m not sure why it’s called the 5x Rule, but that’s how its described in several different places.

Pros: Rent prices tend to correlate with age, condition, and desirability of neighborhood

This rule is actually not widely used compared to the rest, but I find it the most useful because of its flexibility.

Cons: No rule is perfect, but this one is pretty good.

5% Rule

You should expect to spend 5% of your total income (total rents) on repairs and property maintenance.

$100,000 property rents for $1,000/mo X 12 months

$12,000 a year x 5% = $600 a year budget for repair expenses

Pros: Easy to calculate. Half of ten percent. You can do it in your head.


Cons: Estimates come out too low.

While this a fairly well-known rule, I find it to be an unusually low estimate.

First, this is out of line with the 5x Rule, which states expenses will be 1.5 times monthly rent.  I felt the 5x rule was the best estimate so far.  If you do the math, that rule works out to 12.5% of total income on repairs. 

The 5% rule here is way too low

Not even half the estimate of the 5x rule.

Unless your property is close to new and in excellent repair, 5% expenses would be unlikely in reality.

That being said, I often see pro formas (estimate of expenses) on turnkey real estate or on other promotional literature about real estate investing that claim a 5% maintenance estimate.

Source: memegenerator.net

To add insult to injury, they often don’t include an estimated expense for capital expenditures, which means the 5% is meant to cover both.

This it why uniformed investors lose money on rental properties they buy.

50% Rule

Total operating costs will equal approximately 50% –  or half  – of your yearly rental property income.

This is probably the most popular formula for expenses, but it applies to all rental expenses, not just repairs and maintenance. 

The 50% rule also applies to capital expenditures, property management,  taxes, insurance, vacancy, and all other operating expenses.

 Since property management is included, if you self-manage, you could probably use 40% as your rule, although the value of using your own time for management is worth something.

See a more in-depth explanation of the 50% Rule.


The estimates you get from these rules may need to be adjusted based on the following criteria:

  • age of the property
  • condition of the property
  • amount of turnover/crime in the area
  • cost of living

You should consider how much your prospective property differs from the average property.  If yours is much older or in a much higher crime area, you should consider raising the estimates for your rental expenses to make up for the increased likelihood of higher expenses.

I believe the best formula is the 5x rule (1.5 x monthly rent). It can account for these variables better than the rest, and it’s conservative enough to keep you out of trouble.

To accurately estimate your expenses, you need to know the difference between maintenance/repairs and capital expenditures.

Capital expenditures are a separate category from maintenance/repairs. You need estimates for both.

Read moreEstimate Rental Expenses Like the Best Investors

How Much Money Will I Make From My Rental Property?

Most people grossly overestimate the cash flow they are actually getting on their rental property.

At the same time, the people trying to sell you investment properties also have a habit of fudging the numbers on cash flow and return on investment.  

I’m here to make sure you can spot these inflated numbers a mile away.

The mistake most people make is believing that your money left over after paying a mortgage each month is your cash flow


You need to subtract your mortgage from rent, then subtract all other expenses to arrive at your actual cash flow.

In many people’s case, this is a negative number.

That means you are not cash flowing, you are paying money out of pocket to own this investment.

Make sure this doesn’t happen to you.

It is helpful to understand two simple concepts for this all to make sense.

Those two things are the 1% rule and 50 % rule, which are easy to do in your head, and can save you the trouble of breaking out the calculator for rental properties that clearly won’t make money.

1% Rule

The 1% rule is quick and easy. Monthly rent should be at least 1% of the acquisition price. The acquisition price may be a higher number than the purchase price. It is purchase price plus the money to get the house ready to rent.


$80,000          to purchase house                plus

$20,000          remodeling                            equals

$100,000        acquisition cost.

$100,000 home should rent out for at least $1,000 a month, or it would not be a good investment.

          What is the logic behind the 1% rule?

If a house will give you 1% of the purchase price each month in rent, then it gives you 12% of the purchase price each year.   That apparently means the investment makes 12% a year!!!!


Read moreHow Much Money Will I Make From My Rental Property?

Ready to Invest in Real Estate?

Do you think you are ready to invest in real estate?

Many people want to invest in real estate before they should.

People see the success of others in real estate, and want that for themselves.

But it is as simple as it looks?

You are not ready to invest in real estate until you have:

  • your debt under control
  • regular contributions to retirement accounts
  • the right knowledge about where you will invest
  • the correct type of mentor

Why do we want to invest before we should?


We have FOMO.

Fear of missing out.

We are under barrage from podcasts, books, lame blogs (like this one), and for some of us old people that can remember, Carleton Sheets infomercials.

Real estate investing is made to look easy

Read moreReady to Invest in Real Estate?

8 Must-Do Steps to Survive Coronavirus

coronavirus investing

My thoughts on Coronavirus and how it affects our investments, real estate, and life…

It seems like investments and real estate IS my life!

I have to admit.

I’m one of the people who thought this crazy thing was limited to Asia, and maybe a few tourist destinations.

There were a lot of people in agreement with me who kept asking what all the hype was.

Well, that hype somehow became reality, at least for the time being.

I tried to fly to Boston yesterday to participate in a real estate event I was asked to speak at.

The event got cancelled as I arrived in a DC airport. 

I bought a return ticket same day back to Alabama, realizing this virus was having a significant effect in my life.

In all of our lives.

Here’s a list of things I think are smart to consider for life in this period of extreme uncertainty with Coronavirus (COVID-19).

1.  Don’t Sell

Read more8 Must-Do Steps to Survive Coronavirus

Finding Off-Market Properties Insanely Easy

off market properties

Finding off-market properties and getting a good deal is absolutely key to being successful in real estate investing.


The market is hot.   And overpriced.

We are near or at the top of a real estate cycle.

This mean most cities are saturated with investors bidding up the prices of all types of real estate investments.

How can you be successful as a real estate investor in an environment like this?

Find ways to contact motivated sellers that aren’t currently listing their properties for sale.

Finding Great Deals on Real Estate

Here are the top ways to find off-market deals:

  1. Directly contact owners – voice call, text, or mail
  2. Driving for dollars
  3. Wholesalers
  4. Short Sales
  5. Auctions / Foreclosures
  6. Tax Liens and Tax Deeds
  7. Networking (Investors, Property Managers, Contractors)
  8. Craigslist
  9. Probate

We’ll go through each one-by-one.

Through these methods, you find a way to not pay full price on the multiple listing service (MLS) like everyone else.

Read moreFinding Off-Market Properties Insanely Easy

Long Distance Real Estate Investing Secrets

long distance real estate

What do I know about long distance real estate investing? 

As a military member:

  • I’ve moved every 1 to 3 years while investing in real estate
  • I currently have 20 paid-off single family homes
  • I’ve self-managed and used management companies
  • I bought 16 properties while living overseas

I read a blog post this morning that said investing long distance requires a slightly different approach than normal real estate investing.

from istock.com

It’s a different ball game altogether.

The secret to mastering long distance real estate investing is getting these 5 things right:

  • The Importance of Boots on the Ground
  • The Best Real Estate Agent for Long Distance Investing
  • Choosing a Property Manager from Long Distance
  • Choosing the Right Property from Long Distance
  • Managing Contractors from Long Distance

The Importance of Boots on the Ground

from flick.com

This is where I feel a lot of new investors make their first mistake.

They are neglecting the importance of having boots on the ground.

There have been good books written about long distance real estate investing and how easy it can be done using video, pictures, docusign, and aligning yourself with a great “team.”

This all sounds great, and might work for an experienced investor.

I can tell you from a practical standpoint, however, that nothing replaces the importance of having boots on the ground that you can trust in the location you are investing. 

Whether it is a contractor trying to rip you off, tenant trashing a house, or just a need to respond quickly to an emergent situation at your property, there is nothing like having someone you trust that can tell you what is actually going on with your property.

Read moreLong Distance Real Estate Investing Secrets

Secrets to Investing with VA Loans

va loan investing no money down

Investing in rental property with VA Loan is a tricky subject.  There are many rules that dictate how a VA loan should be used.

Bottom Line Up Front (BLUF):  VA loans are not authorized for investment properties, but there is no rule stopping you from moving out after initially living in the property and making it an investment.

There is also a way to buy a 2, 3 or 4-plex property, live in one unit, and legally rent the rest out.

The VA doesn’t say you can use the VA loan for investing, but if you understand the rules, and buy properties as you move from assignment to assignment in the military, it is possible.

You can’t just buy a home and make it a rental property without living in it first.  There is an occupancy rule I’ll be discussing.

You can, however, buy a house at your current assignment using your VA benefit, live in it, turn it into a rental property when you move away, and buy a house at your next location with a VA loan repeating the entire process.

Another possibility for real estate investing with a VA loan is buying a 2, 3, or 4-plex using your VA benefit and living in one of the units while renting the other units out.  When you move on to your next assignment, you’ll be able to turn the entire property into a rental property legally.

Let’s start digging into the details!

The first thing we need to understand is the occupancy rule.

Occupancy Rule

Read moreSecrets to Investing with VA Loans