I learned a concept the other day at a meeting of the minds that I found very interesting. It’s called the Rule of 72; simplified, what it does is closely estimate how long it takes for invested funds to double for you. I’m not a lender or investment advisor by any means, please bear with me as I attempt to share what I’ve learned.
Basically all you need to do is take the number 72 and divide it by the current interest rate on your investment (i.e GIC’s). Let’s generously give the hypothetical investment a 2% interest rate. Soooo…here’s what that would look like:
72/2= 36 years
30 years old you invest $50,000 into a GIC
66 years old that amount invested is $100,000
102 years old that amount invested is $200,000
Ok, really?? I don’t know about you but that will not work for me. Especially being self-employed, my comfortable retirement depends solely on me! I need to plan and save to live the life I want and can not rely on much government assistance to do so. If I retire at 60 or 65, let’s hope I have 20-30 years of retirement. If I want to have $60,000/year to enjoy my retirement then I need 1.5 million dollars saved. Sounds daunting, but luckily I still have 20 years in the workforce to prepare for and create the retired life I want. And by the looks of it GIC’s are not going to be part of my plan. So what is a girl to do?
$50,000 is a 25% down payment on a $200,000 property! Hmm.. lets evaluate that for a
Mortgage rates have been historically low for some time now, and there are no signs of that changing any time soon, in fact, the only way those GIC rates would go up for the people is if mortgage rates went up as well. So if I invest my $50,000 in a moderate $200,000 revenue property, the renter’s would be making my mortgage payment for me and I would have a $200,000 asset waiting for me at retirement. That’s not even taking into consideration the increase in the home’s value over time. Here are a few examples of that value increase (sample properties were researched and gathered from the Matrix system and Alberta Real Estate Association) These are all real properties that listed and sold in Rocky Mountain House.
2005 home sold for $203,000 – in 2011 the same home sold for $373,500 so in 6 years that’s about 54%
2005 home sold for $196,000 – in 2007 the same home sold for $339,900 so in 2 years that’s about 58%
2005 home sold for $207,000 – in 2012 that same home sold for $311,000 so in 7 years that’s about 67%
Of course the market has its ups and downs just like the investment or stock market, but even if I just rented out my revenue property for the next 20 years, the mortgage would be paid off and I’d be receiving rental income monthly with the option of liquidating that asset at any time and putting at least $200,000 in my pocket. If I acquire 5 homes in the next 20 years of employment that’s a potential million dollars cash right there!
I also feel as though investing in real estate is real. I mean touch it, keep an eye on it, control it’s condition (adding to the value) REAL! I listened to a speaker who said (amongst other mind blowing things) “government gave private banks permission to lend money that doesn’t exist, they click a key on a computer and generate ‘money’ out of thin air, they don’t actually have it in their vault. Currently the banks have approx. 4 billion on reserve but have loaned out over 1.5 trillion dollars.” This made me wonder what would actually happen to my money if invested in a bank? Poof, it’s gone into this imaginary system of lending and receiving, or maybe it’s already been spent before I even gave it to them; the gross national debt was said to be approx. 800 billion dollars with 160 million a day in interest, that’s 60 billion dollars a year….is that where my “investment” would go? There are definitely some things I can believe in without seeing…such as karma, intuition, heck maybe even ghosts….but where my money and retirement are concerned I’d feel much more comfortable being able to see it!!
Well, I think investing in real estate just became part of my retirement plan. If you’d like to get more information on revenue properties available to purchase now, homes that you can see, touch, control;) please feel free to contact me anytime, as always 403-846-6958