CALCULATING RETURNS (ROI) IS – Important Stuff!
Did you know the true return on your investment is the 18.65% IRR shown below NOT the Cash ROI as many think? See also how your returns jump from 7.61% to 18.65% simply by using the bank’s money. As we say, you’d be crazy not to leverage!
Money in the Bank
Risk is a natural part of life. Sometimes we take ones that benefit us, and other times we wind up learning a very valuable lesson. When it comes to money, many people choose not to risk it. Instead they deposit it in a bank, under the notion that this is the safest option. And relatively speaking, it is safe. You are guaranteed a minimum of 2.5 – 3% interest accumulation annually and it’s not prone to any market fluctuations. However, if the reason you’re depositing your hard enough dollars is to make a profit, why not consider taking a calculated risk?
According to the latest ASB bank survey on ‘Where Best to Make Money‘, the popular consumer opinion was in rental property. Bank accounts, in comparison, were viewed as the worst place to invest. Perhaps this is because bank savings often lose purchasing power, instead of gaining it.
Consider the static rate of return in a bank. Now think about the dynamic, shifting costs of the economy. Everyday goods and services are, for the most part, regularly rising because of inflation. Banks don’t look at this, meaning that if the annual inflation rate was say 10%, and you’re only receiving a 3% return, you’re essentially losing 7% of your savings’ value. And that’s just over one year – what happens if you leave it in there for the duration of your working career?
In the words of Warren Buffet, possibly the greater investor in the world, “Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value.”
While all risk has a chance of failure, a calculated risk looks at the probability of it before action is undertaken. By no means do we at Estero Property recommend simply jumping into real estate investment. Instead, we encourage you to do your homework and be confident in your decision. Research online, talk to other investors, or set up a meeting with a property investment firm such as ours.
What you are likely to find is that property investment results in more successes than failures. Why? Because real estate is simple, you can leverage it, it is tangible and over the long term, it always rises in value. While there are bound to be storms along the way, a cash flow focused individual learns to whether these. Just as life does not travel in a straight line, neither does business, shares or property markets.
Case in point, American real estate is only just starting to see the sun again. Many homes are still selling for exceptionally low prices. The benefit to this is that in this current climate, with investors investing at the bottom of the market, the odds are stacked in their favor for strong monetary growth. How much could you possibly make? Contact us at Estero Property to find out.