{"id":902,"date":"2007-01-16T13:03:21","date_gmt":"2007-01-16T20:03:21","guid":{"rendered":"http:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/?p=902"},"modified":"2007-04-20T16:05:40","modified_gmt":"2007-04-20T23:05:40","slug":"compounding-return-on-investment-what-matters-to-investors-invest-1-get-2-back","status":"publish","type":"post","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/902\/compounding-return-on-investment-what-matters-to-investors-invest-1-get-2-back\/","title":{"rendered":"Compounding, Return On Investment, & What Matters To Investors — Invest $1 Get $2 Back"},"content":{"rendered":"

The miracle of compounding<\/em> is what it’s called. The ability to earn interest on interest is the simplest way to put it. Start out with a hundred bucks at 8% annually and beginning the second year you’re earning 8% on $108. Keep that up for about nine years and you have $200. So if at age 30 until age 65 you put away $4,000 yearly, compounding annually at 8%, you’d end up with just under $690,000. And if it was in an IRA or 401k that money is taxable as it comes out. Of course, if for some reason you don’t need it, and wish to have it continue compounding, tough luck. Uncle Sam will force you to begin taking it out and paying taxes on it. But I digress.<\/p>\n

What does return on investment mean? Try getting three investors together to decide the answer to that one. Is it cash flow? Do tax benefits come into the picture? Is it simply a function of money in and money out? Cash on cash? All the above? None of the above? I’ve heard all kinds of definitions.
\nDoes it really matter?<\/p>\n

If you invest $100k today and upon selling receive your original capital back plus another $100k in four years, do you care what your ROI is? No, you’re too busy bragging to your brother-in-law, who wouldn’t go in with you at the beginning, how you doubled your money in 48 months. Your ROI is the pained look on your sister’s face, right? \ud83d\ude42 All you care about is you put $100k in, got $200k out, and you’re ready to rock ‘n roll again.<\/p>\n

But what does it take to accomplish that? In rough numbers, if you bought $455k in income properties at 20% down, with about 2% closing costs, you’d have needed $100k to close the escrow. If for four years those properties increased in value at 7.6% each year they’d be worth in the neighborhood of $610k. (And yes, there are places where properties are going up at that rate.) If your total cost of selling was 8%, you’d have roughly doubled your money Read more<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The miracle of compounding is what it’s called. The ability to earn interest on interest is the simplest way to put it. Start out with a hundred bucks at 8% annually and beginning the second year you’re earning 8% on $108. Keep that up for about nine years and you have $200. So if at […]<\/p>\n","protected":false},"author":8,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_crdt_document":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[8,5],"tags":[],"class_list":{"0":"post-902","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"hentry","6":"category-investment","7":"category-real-estate","9":"no-featured-image"},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":928,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/928\/the-carnival-of-real-estate-20\/","url_meta":{"origin":902,"position":0},"title":"The Carnival of Real Estate . . .","author":"Greg Swann","date":"January 22, 2007","format":false,"excerpt":"...is up at Minneapolis Real Estate Market Update. And the winner is... our own Kris Berg with The Plastic Pig (and How to Pick Your Agent). Kris also wins The Carnival of BloodhoundBlog, a testament to her excellence amidst the stiff competition around here. The Carnival of Real Estate Investing\u2026","rel":"","context":"In "Blog Carnivals"","block_context":{"text":"Blog Carnivals","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/blog-carnivals\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":6395,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/6395\/happy-new-ah-to-hell-with-it\/","url_meta":{"origin":902,"position":1},"title":"Happy New… ah, to hell with it.","author":"Sean Purcell","date":"January 1, 2009","format":false,"excerpt":"Please, allow me to be the very first to wish you a Happy New Year!\u00a0 What's that?\u00a0 Not the first huh; the second?\u00a0 The tenth?\u00a0 Well just forget it then.\u00a0 Truth be told \"Happy New Year\" is kind of silly isn't it?\u00a0 I mean, it's just an imaginary line drawn\u2026","rel":"","context":"In "Flourishing"","block_context":{"text":"Flourishing","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/flourishing\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":13109,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/13109\/tag-teaming-off-of-jeff-brown-daily-action-builds-habits-so-dont-break-the-chain\/","url_meta":{"origin":902,"position":2},"title":"Tag-teaming off of Jeff Brown: Daily action builds habits, so don’t break the chain.","author":"Greg Swann","date":"August 30, 2010","format":false,"excerpt":"I had a short sale get to approval this morning, which puts us one tiny deal away from a million-dollar September. We haven't seen many million-dollar months since 2005, and it's a harder target to hit than it was in those days. I'm loving where our business is going, and\u2026","rel":"","context":"In "Egoism in Action"","block_context":{"text":"Egoism in Action","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/egoism-in-action\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":18693,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/18693\/am-i-charging-enough-rent-for-my-investment-property\/","url_meta":{"origin":902,"position":3},"title":"Am I charging enough rent for my investment property?","author":"Brian Brady","date":"April 11, 2022","format":false,"excerpt":"I don't need to tell you that housing inventory is tight. Buyer agents are having a hard time earning a living today while listing agents are finding more and more competition. . One thing you can do is to prospect out-of-state investors and offer one free service for them-- comparable\u2026","rel":"","context":"In "Marketing"","block_context":{"text":"Marketing","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/marketing\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":821,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/821\/the-s-p-is-up-over-16-in-2006\/","url_meta":{"origin":902,"position":4},"title":"The S & P Is Up Over 16% In 2006!","author":"Jeff Brown","date":"December 31, 2006","format":false,"excerpt":"Over the last half century or so the S & P has averaged, give or take, about 8% growth annually. Pretty impressive. A lot of folks are very impressed, especially those who've invested into vehicles tied to the S & P index. They did better than ok this year, don't\u2026","rel":"","context":"In "Real Estate"","block_context":{"text":"Real Estate","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/real-estate\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":3995,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/3995\/pricing-analysis-is-greek-to-me\/","url_meta":{"origin":902,"position":5},"title":"Pricing Analysis is Greek to Me","author":"Sean Purcell","date":"August 19, 2008","format":false,"excerpt":"I think most of us can agree that\u00a0real estate agent, as a\u00a0profession, lacks\u00a0\"street cred\".\u00a0 The reputation for our industry is not high and I say this\u00a0despite the reputable people I meet here and elsewhere.\u00a0 Two ways to effect a change in that perception are: raise the bar of competition and\u2026","rel":"","context":"In "Real Estate"","block_context":{"text":"Real Estate","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/real-estate\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"_links":{"self":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/902","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/comments?post=902"}],"version-history":[{"count":0,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/902\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/media?parent=902"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/categories?post=902"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/tags?post=902"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}