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After 37 years the same FINANCIAL FORMULA STILL WORKS

April 17, 2015 by  
Filed under blog

I was going through a bunch of old documents, notes, and papers the other day and came across the very first article ever written about me in the local newspaper.  The headline read “So Here’s How to Go About Making that First Million”. That was in the Salt Lake Tribune clear back on January 18, 1978

They quoted me as saying “…the best way to get rich with someone else’s money is through loans–mortgage and real estate loans.”

Now we fast forward 37 years and guess what?, That old method of getting rich, for most people, is still the best and most reliable way to make your first or second or fifth million. I did however get a big kick out of reading my example and some of the numbers of how you make a 100% return on a simple investment, such as a small house.  It was the small numbers that made me smile.  I had been quoted as saying:

“If you have $5,000 to put down on a $50,000 house and you borrow the other $45,000 to purchase the house, you can compound your investment by 100% if that house increases in value by $5,000 over one year”.

Most casual readers would quickly say or think, “Wait a minute, where can you find a house that you can buy for 50k?  They don’t exist anymore.” If you say that, of course you are right about finding a 50k house but that doesn’t mean the same formula used back then won’t work today.

That financial formula for great wealth is still the same today, but you do need to add something–simply a zero to each of the dollar numbers.  It’s the ratios that give you the 100% return on your money.  You are right if you are thinking that 10% increase in value won’t just happen by itself though. That is unless you are really lucky and we have 10% inflation in one year. But don’t count on that. However, you might be able to buy a house at a real bargain price then make cosmetic improvements which costs money and or your time and efforts but that may well increase the value by 10%.  Of course with the additional money you put to fix it, it may reduce your overall return to 50% or 75%.  But still, those kinds of returns will almost certainly make you a million or multi-millions over time.

Go ahead and google “compound table calculator” and see how quickly 50% or 75% returns increases $5,000 dollars into a million dollars! You may be shocked; especially what it turns into in 15 or 20 years.