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Three
Rules that the rich use to Build Wealth:
- The"Rule
of 72"
This rule is used to determine how long it will take your money
to double at a given rate of return. If you divide your rate of
return into 72, the answer will show you how long it will take your
money to double. For example, if you earn 6% on a savings account,
it will take you 12 years for your money to double in value, (72
divided by 6). If you are able to increase your return to 10%, your
money will double in 7.2 years, (72 divided by 10).
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$2000.00over
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3%
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6%
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12%
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18%
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24%
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36%
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24 yrs at:
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$4000.00
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$8000.00
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$32,000.00
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$128,000.00
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$512,000.00
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$9,000,000.00
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- The"Rule
of Leverage"
You can leverage to increase your rate of return. You can leverage
your investment by using a loan on the property versus your own
money you invest. The tenant makes the payments for you by paying
rent. When you leverage (use a loan), your rate of return in increased.
For example, if you purchase a property for $100,000 cash and it
increased in value 5%, you have earned 5% on your money ($5,000
divided by $100,000) plus the amount of rent collected. However,
if you purchase the property with 10% down payment, and a $80,000
loan, your rate of return will be 10 times greater or 25%.
- The"Rule
of Return"
Use these simple steps to figure your return on an investment:
For example, if your down payment is 10%, when we convert it to
a fraction your down payment is 1/10. The denominator is 10. Multiply
the denominator times the property appreciation rate (say 10%) and
your first year return on investment is 100%. Let's test this rule.
Let's say we buy a $150,000 property and put 10% down with a $135,000
loan. Our down payment of 10% converted to a fraction is 1/10. If
the property appreciates 10%, it will go up $15,000 in value. $15,000
divided by our investment of $15,000 equals a 100% first year's
return.
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