One real estate sales technique is to encourage customers or clients to buy today because the value of the property will probably increase during the next few years. "Buy this lot today for $30,000. In 2 years, I project that it will sell for $32,500." Let’s see if this is a wise investment. ,In 2 years, the future value is projected to be $32,500. If the interest rate is 12%, compounded annually, what amount should you invest today to have the $32,500 in 2 years?,The factor for 12% and 2 periods is 0.79719.,Present value = $32,500 x 0.79719 = $25,908.68.,By investing only $25,908.68 today at 12% for 2 years, you will have the $32,500 needed to purchase the land. You have actually paid only $25,908.68 for the lot, a savings of $4,091.32 on the $30,000 price. ,With the above being true, what are the advantages and disadvantages of waiting to buy the land?
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