Originally Posted by
tommy_d
I'm struggling with the maths in the post above a little. The small error only reinforces the point being made though <img src="images/smilies/001_smile.gif" border="0" alt="" title="Smile_2" smilieid="17" class="inlineimg"><br>
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property increase at 10% a year. I assume after five years that means an increase multiplier of 1.1 to the power of five, so 1.6105. Seems to check out. <br>
year 0 = 1,000,000<br>
year 1 = 1,000,000*1.1 = 1,100,000<br>
year 2 = 1,100,000*1.1 = 1,210,000<br>
year 3 = 1,210,000*1.1 = 1,331,000<br>
year 4 = 1,331,000*1.1 = 1,464,100<br>
year 5 = 1,464,100*1.1 = 1,610,510<br>
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so the ATM share price would have to increase even more than the stated 50%. The thing about the house though is that you might be able to buy it using leverage, so that gain could be made on an initial outlay of $100,000 if you can get a 10% lvr. Which is pretty much the maths that has been rewarding those using debt to buy houses, leverage is king, well, maybe heir to compounding interest, but close...