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What Every Real Estate Investor Needs to Know About Cash Flow... And 36 Other Key Financial Measures, Updated Edition, 2nd Edition by Frank Gallinelli

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CHAPTER 3How the “Time Value of Money” Should Influence Your Real Estate Investing Decisions

It may seem that the subject of compound interest belongs strictly to the world of savings accounts and certificates of deposit and has little to do with real estate. The truth, of course, is that compound interest is a way of understanding how the value of your investment is increasing (or decreasing!) over time. Understanding how this works is critical to understanding the value of any real estate investment.

The compounding with which you’re most familiar occurs when you deposit cash in a bank. Your money earns interest at a specified rate, and that interest is compounded at regular intervals. For example, suppose you deposit $1,000 at an annual interest ...

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