For Chicago Blackhawk fans, 72 or Artemi Panarin simply means a game changer. This Russian rookie winger has had a breakout year in the NHL. His nickname is “The Bread Man.”
And in (real estate) investing, the simplest way to make some bread (money) is to understand the rule of 72.
The rule of 72 is a simple way to estimate the number of years or the interest rate needed to double your initial capital investment, where you divide the annual interest rate or years by 72.
For example, if you archived annual interest of say 7% on a real estate investment, you would double your money in 10.29 years (72 divided by 7 = 10.29).
Alternatively, let’s say you wanted to know the interest rate you might need to double your money in say 5 years, that would be 14.40% (72 divided by 5 = 14.40).
These simple mathematical calculations help even the most sophisticated real estate investor set goals and evaluate multiple opportunities in a fast and changing environmental. Simplicity often does trump overly complicated analysis to help make a deal.
Often real estate professionals have said, “If you cannot explain the deal on the back of a napkin, no one will ever take the time to understand the details necessary to invest. The result, no deal.”
Any way you slice it, the simple way to make a lot of bread is the rule of 72!