The Compounding Power of The Passive Investment Over Time

The Compounding Power of The Passive Investment Over Time

Have you ever played the game where you imagined what you would do with your next $100,000? If you are like me, the idea of a new car or material possession likely popped into your head. While those are great and fun to buy and own, the practical side of you likely responded with the all-too-common “save and invest” answer. Good thought, but let’s take it further.

When working professionals come across a large sum of money, such as $100,000 as in this example, and, rather than invest, choose to consume, they do not lose $100,000; they are losing $400k of wealth. What do I mean? I am referring to the compounding power of the investment over time.

Investment Scenario

Using a financial calculate, Excel spreadsheet or app, anyone can create an investment scenario of how their wealth can grow over time.

Let’s see how $100,000 invested at an annual rate of 10% grows over 5, 10 and 15 years.

  • Year 5 – $161,051
  • Year 10 – $259,374.25
  • Year 15 – $417,724.82
  • Bonus: Year 30 – $1.7 Million

Wow! Instead of spending and forever eliminating the compounding power of those potential investment dollars, if one were to invest, that money would grow to ridiculous values. Although this scenario assumes that the returns are constantly reinvested each year, it shows the compounding power of reinvested returns over an initial investment.

This is why I love passively investing in multifamily real estate. By putting my capital to work and reinvesting them into the next opportunity, as best as I can, I am growing my initial investment by compounding.

Working Professionals

Unlike stocks, where volatility can destroy your initial investment, when you passively invest with the right team and the right multifamily opportunity, protecting your initial investment is the highest priority. After preservation of capital comes the passive income and then the sizable potential returns that come as a result of improvement to operations. This upside increases the net operating income of the property, and therefore distributions, as well as the eventual sale price. As your initial investment produces passive income, the eventual returns grow and can be reinvested into the next deal, increasing your money at work, thus compounding that initial investment over time. This is when your money starts working harder than you!

Remember, next to the percentage return, the most critical variable to creation of wealth is time, so it is important to get started today!

Next Steps

If you have not already, download our free Passive Investor Startup Guide and schedule your call with us to find out if passive investing in multifamily is right for you.

Safe Investing!


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Passive Investor Startup Guide

To find out more about what it looks like to invest as a passive investor in multifamily real estate, download our free Passive Investor Startup Guide here!

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Rodney Robinson II

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