Someone questioned my math?

Hey guys, Mikkel here, 

I had a couple of people write in after today’s newsletter with a fair question about the numbers I shared.

Specifically, this line:

“With conservative returns in the 8% range, you’re looking at a payback period of roughly 12 years.”

Now, at face value, that’s not necessarily wrong.

…but it is incredibly simplified.

In simplifying it, I left out a few important factors that materially change the overall financial picture (for the better). 

Allow me to tighten things up for you and give you a bit more technical, optimistic breakdown of what to expect. 

First, the 8% I mentioned is only the expected return rate for the first year. 

As demand builds, returns are expected to increase meaningfully (10.8% in year 2 and 12.1% in year 3 are our projections). 

“Returns shown are estimates, not guarantees; all investments carry risk, and past performance is not indicative of future results.”

Second, there’s the capital appreciation that occurs during the build cycle itself.

Based on what we’ve seen historically in this region, you’re looking at roughly 30% appreciation from pre-construction to delivery… sometimes more.

Yes… 30% appreciation in 22 months or less. 

Now… this is where things start to compound in a way that I previously neglected to cover…

An 8% return on $100,000 is one thing.

…purely an example, but earning 12% net-net in just a few years is something entirely different because now you’re not just benefiting from a higher return rate… you’re benefiting from a larger equity base, too.

Let me put that into real-world terms for you:

At 8% on $100,000, you’re earning roughly $8,000 per year… or about $650 per month.

Fast forward a few years, and now you’re earning 12% on $130,000.

That’s $15,600 per year… or roughly $1,300 per month.

You see, your monthly income has effectively doubled in just a few short years. 

Simply put, as the property increases in value and the returns rise alongside it, those two forces begin working together, and that’s where the real acceleration happens. 

Now, for those of you who like to think in terms of frameworks, a simple way to understand this is through the “Rule of 72.” It’s a quick way to estimate how long it takes for your money to double (which is effectively the same as your payback period), and this rule works because it captures the effect of compounding growth over time. 

It’s simple: you just take 72 and divide it by your rate of return.

So, according to the Rule of 72, at 8%, your money doubles in roughly 9 years.

…after that, every single penny you receive from this investment is pure profit.

Now, the reason I didn’t go into this level of detail in the original email is simple: things can get technical very quickly.

My plan was to keep things clear and approachable, not get into the nitty-gritty, and just leave that for Saturday’s presentation; however, I oversimplified what’s really happening here and didn’t present the numbers in as attractive a format as I should have.  

Now, I always prefer to underpromise and then deliver results that exceed expectations for families and investors like you; however, in this case, I should have been clearer, as the story is actually more compelling and more interesting for you guys.

I appreciate you guys writing me about things, and I hope this clears things up!

If you haven’t registered for Saturday’s special presentation, you can do so right now by clicking this highlighted blue text. 

See you Saturday at 10am, Panama Time,
Mikkel