Page 123 - Rich Dad's Increase Your Financial IQ: Get Smarter with Your Money

guaranteed $3 million bonus each year. Unfortunately, things didn’t go well
and Nardelli finally resigned, but only after the board of directors agreed to

pay him $210 million to do it.
To me, this is excessively expensive, and a rip-off. It’s why I don’t like
paper assets. Most paper assets are run by MBAs, employees who think
more about their personal finances than their investors’ financial security.

By the way, Home Depot’s executive compensation, while high, is not
necessarily an exception. It’s the norm.

3. The liability column. My 300-unit apartment house had an existing
mortgage interest rate of just 4.95 percent. The low interest rate increases
the asset value of the entire property. By adding a second mortgage at 6.5
percent, we created a blended rate of about 5.5 percent (taking into account

the different amounts of the two loans). This low interest rate is an
important control and leverage. A percentage point on millions of dollars
has a great impact on net income.
For example, a 1 percent savings on a $10 million mortgage is $100,000

in extra income annually. As the diagram below illustrates, reducing debt
and interest rate expense on debt is also an example of leverage.