Einstein’s formula proves value of buying Colorado real estate

by | Jan 20, 2016 | Blog, Buying a Home, Denver Real Estate Market, Mortgage & Finance

Trying to grow money in a savings account these days is about as effective as trying to grow a magnolia tree in the middle of a desert. With interest rates stuck at 0.1% or less, it’s no wonder financial advisors turn to real estate.

In this market, an investment in real estate pays dividends far greater than any savings account. For a quick way to show the advantage of real estate, Real Estate Insider uses Albert Einstein’s “Rule of 72.” The formula is an easy way to calculate the time it will take an investment to double, given a certain interest rate.

Einstein’s formula shows that a savings account earning 10% interest will double in 7.2 years. At 1%, it will take 72 years and at 0.1% — where rates are now —it will take 720 years.

By contrast, notes Insider, the value of residential real estate in Colorado has more than doubled in the last 24 years (since 1991), enjoying a whopping 252.6% aggregate appreciation.

“Einstein called compound interest the ‘ninth wonder of the world.’” notes Insider. “Makes you wonder what he might have said about Colorado real estate if he was around today.”

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