The Importance of Growth —A Word About Inflation

During the past 10 years the purchasing power of your dollar has declined about 50%. Think back a little further. Remember when you could buy a loaf of bread for 11 cents? Then ask an old-timer and let him tell you that 40 or 50 years ago he worked for $2.50 a week.If anyone tries to tell you that inflation is just a tem¬porary phenomenon, don't you believe it. It has been going on for centuries and is going to continue.

Let us take a look into the future and see whether we can form an idea how you will fare with your syndicate investment in 10 or 20 years from now. What would hap¬pen to your investment if you were to receive the same amount of dollars every year and if the purchasing power of the dollar were to decline every 10 years by one half? In 10 year a $10,000 investment with a 10% distribution would still yield $1,000. But the purchasing power would be only that of $500. In 20 years the purchasing power would shrink to $250. But not even all of that money would be yours. We have seen in previous chapters that your partner, Uncle Sam, always gets his share. So you figure out how much you will be able to buy with the income from your investment 10 or 20 years from now.

This is a problem which we all face and a problem which we all have to solve. The employee gets higher wages. (Remember it is only 20 years ago that the mini¬mum wage was 30 cents an hour.) The manufacturers, the retailers, the farmers, get higher prices for what they sell. If your investment is to buy the same quantity of goods and services for you, you too have to get more dollars.

Yes, the amount and percentage of your yearly distrib¬ution is important. If the net yield after taxes to you is less than 10%, it may still be an excellent investment. But you do not live on percentages. What you need is food and housing and clothing and vacations. You want at least to maintain your purchasing power to buy all that. If possible, you want to increase it. What you want and what you need is GROWTH. The growth potential of money invested in real estate is tremendous. Let's see how it works.

Next: Leverage in Real Estate