Posted by: Dexter and Pamela Montgomery | March 20, 2013

Real Estate Investing for The Savvy Investor™

Knowing Your Numbers – The Rule Of 72

Do you know your numbers? If you plan to do any type of investing you must know your numbers. Your numbers tells the story of (1) where you have been; (2) where you are; and (3) where you are going. Your numbers represent the scorecard of how well you are doing with your investment. In real estate investing, knowing your numbers can mean the difference between profit and loss.

One of the most important numerical concepts for any investor is the Rule of 72. The Rule of 72 is a simple way to determine how long it will take for an an investment to double in value, given a fixed annual rate of interest. It is useful when trying to determine how hard your money has to work in order to duplicate itself.

No one really knows how this rule developed but historians say that the oldest known reference to it is in the “Summa de Arithmetica” by Luca Pacioli dated to 1494 AD. The formula for the Rule of 72 works like this, take the rate of growth and divide it as a whole number into the number 72.

For example, you purchase a piece of property for $50,000 in an area where the property value has grown for 4% annually. If this growth rate continues, it would take 18 years for that property to double in value (72/4=18).

This is important information for real estate investors because you want to invest in an area that you know will have a reasonable appreciation or growth rate. This will help you minimize your risk and maximize your return.

You have a choice to make. Do you stay on the treadmill of life hoping for wages to increase or by finding another job? Or, do you decide to take the steps to make life better for you and your family and never look back?

In The Savvy Investor Program™, we teach you how to create your own economy. We help you get off the treadmill. Remember that with real estate investing as one part of your financial plan, you can create the life of your dreams by following a few time-proven strategies and techniques. Today, take the first step in creating the life of your dreams and buy your copy of The Book on Investing.

Share this post with your friends if you think they are interested in creating the life of their of dreams.

Leave a comment and let us know about other topics that you would like for us to discuss.


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