I wanted to introduce you to the rule of 72, a very easy, useful tool not many people know about. It is very simple and allows calculating the number of years that your investment will take to double: just take 72 and divide it by the interest your money is earning (please note, the interest is compounded meaning it is re-invested every year and taxes are excluded meaning it would work best for RRSPs / 401Ks):
72/ 4% =18 years to double
72 / 5% = 14.4 years
72 / 6% = 12 years
72 / 10% = 7.2 years
72 / 15% - 4.8 years
On the example above it will take 18 years to double your money if you invested at 4% / year. Real estate investors, of course, do not work with just 4% returns. Here is where the rule is useful: Say you will need $1.5 mill in retirement and only have $200k to invest now. Assuming you invest at 12% returns, your money will double every 6 years (72/12%=6 years). So after 6 years, you would have $400k, after 12 years $800k and after 18 years $1.6 mill - retirement. To speed the process up you would invest more money over time or get higher than 12% interest rates.
Income from property = $18,000/year(Rent of $1500x12) - ($629 x12mth = $7548 ) = $10,452 - misc expenses $3000 = $7452 profit/year
Return on Investment = $7,452( Income for year) / $35,000 (total amount invested) = 21% return on investment.
Of course, this looks amazing yet it happens, and the smaller you can put down the bigger the ROI. But it is possible. Different parts of the country have booms and busts all the time. You can even invest in other countries like me as well.
But there is time and effort invested as well, unlike some other investments like IRA's, stocks, bonds etc. With real estate, you also can benefit from tax depreciation, appreciation in-home, and other tax benefits in real estate making your investment even more powerful but the numbers can get tricky.
The interest rates and appreciation in AZ make it very attractive, it's just hard right now to find that 1% rule to work. regards,
Author:Jay Bru Phone: 480-466-4917 Dated: October 10th 2020 Views: 2,281 About Jay: I grew up on a grain and cattle farm in Saskatchewan, Canada where I started working at a very young...
View our latest blog posts in your RSS reader. Click here to access.
My Home Group was established in the Valley of the Sun back in 2004. Its owners are Designated Broker, Jereme Kleven, and the Operations Manager, Mark Hutchins. Together they have over 25 years of experience in the Residential Real Estate Market. My Home Group and its associate Real Estate Professionals collectively have over 100 years of experience.
My Home Group focuses on quality of service and excellent performance with each and every client. This making My Home Group a Rapidly Growing Real Estate Company in Arizona. My Home Group is on the cutting edge of technology. Providing effective tools for each agent's success as well as streamlining each transaction allowing agent's to focus more on their clients and their business. The end result... Amazing results and outstanding customer service every time!
Today, it seems personal touch in Real Estate has been lost. My Home Group takes pride in providing the necessary technology that is needed to succeed without losing that personal touch. This is what makes My Home Group and its agent professionals known for their excellence.