Rule of 72 Explained in 3 minutes

How can you take an advantage of real estate appreciation by using this rule?

Einstein says  “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”

Question is which side of fence you are on; earning or paying?

WHAT IS THE RULE OF 72? The rule is  a simple method of estimating how long it will take compounding interest to double an investment.

For example,

If you invest $1 at 1% interest, I will take 72 years to double your money

If you invest $1 at 4% interest, it will take 18 years to double your money.

Since I am a realtor, I studied the appreciation rate in bay area since 1984. On average, the homes appreciated 8.55% per year past 34 years

Assuming you are buying 2 million dollar house in Palo Alto, based on rule of 72, how long will it take to double your money? $2million at 8.55% your money will double in 8.4 years. Remember, you are not investing the whole 2 million unless you are paying cash. You probably invest 20% of the purchase price and you get to live in your appreciating asset.
What does this mean?

If you are a buyer who are on the fence whether you shoud buy a home or not,Ask yourself two questions,

1. Do I like it enough to make an offer?

2. Can I afford the payment?

If both answers are yes, and you are negotiating the price, let’s say the gap between what seller wants and what you want to pay is $100K.

Don’t let 100K stop you from getting what you want and an opportunity to double your money in 8.4 years.