Rule of 72

What is the rule of 72?

Simply it is a quick approximation of how long at a rate of return it will take to double your money.

How’s it work?

Divide 72 by a number: Rate or years, 6% will take 12 yrs to double or 12% will take 6 yrs to double

  •      72/15= 4.75
  •      72/12= 6.0
  •      72/10= 7.2
  •      72/8= 9.0
  •      72/5= 14.4
  •      72/3= 24.0
  •      72/2= 36.0

If you had $100 dollars and you double your money well it just doesn’t seem life altering.

What if you had a penny and doubled it every day for 30 days?

$10.7 MILLION… Crazy isn’t it! But true. At 15% it takes 4.75 years to double once. Apply that to the Penny and it would take 30 x 4.75 = 142.5 years. I wish you a long life but frankly I don’t want to wait that long so I will need some leverage.

How does leverage help double my money?

  •      $250,000 x 5% = $12,500
  •      $25,000 x 50% = $12,500

72/50= 1.44 years… This is your 10% down payment leveraged with a mortgage to control an asset that appreciates 5%. Over time Real Estate appreciates around 5%. Yes Real Estate Values have ups and downs so timing is important but with Values approaching record  lows we are seeing huge upside potential for future growth.

Combine low values with low rates and the tax breaks for interest and property tax deductions it is cheaper to own than rent! Rents are also on the rise and we are seeing positive cash flows on even single unit investment properties.

Don’t get left behind…

By Bill Frantz   www.PaFhaMortgage.com

 

 

 

 

 

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