Albert Einstein was right......

Albert Einstein described compound growth as the eighth wonder of the world. Although he may have passed away in 1955 the concept of compounding remains the single most important principle governing investment. Compounding simply means that you can earn interest on your principal investment amount, as well as earn interest on top of interest. The power of compounding can make an investment grow much faster than would otherwise have been the case, and is obviously based on the assumption that interest or dividends are reinvested in the same asset...

Albert Einstein put it very simple: “There is no greater power known to man than compounding interest.” Compounding is more powerful than nuclear energy. A 25-year-old can put roughly $3,000 in an IRA every year and with ten percent average returns retire a millionaire at 65. A 45-year-old can do it by maxing out their 401(k) with $1,250 a month. Notice the explosive power: At 65 most of your million dollar retirement portfolio will be in the growth of your savings. For example, the 25-year-old will have invested only $120,000 over 40 years, the rest is compounded interest and appreciation!

And, we all now know that. That's why it's so important to start a savings (and investment) program when you are young.

Let's see what happens when real increasing returns in leveraged Real Estate compounds:

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EXAMPLE:

Year 1: Purchase - - - -$300,000 - - $60,000 invested for $60,000 in equity
Year 2: 20% increase = $360,000 = $60,000 gain = 100% or $120,000 in equity
Year 3: 12% increase = $403,200 = $43,200 gain = 72% or $163,200 in equity
Year 4: 9% increase = . $439,488 = $36,288 gain = 60% or $199,488 in equity
Year 5: 1% increase = . $443,882 = $4,394 gain = 7% or $203,882 in equity
Year 6: 14% increase = $506,025 = $62,143 gain = 103% or $266,025 in equity
Year 7: 1% increase = . $511,084 = $ 5,059 gain = 8% or $261,084 in equity

REAL ESTATE TOTAL INCREASE OF ORIGINAL INVESTMENT OF $60,000 = 350% in 7 years (one full cycle) (70% in an unleveraged investement)

please note that this example is before any rents collected or expenses paid.