In this solo episode of the No Days Off podcast, host Brian Gubernick presents four fundamental financial calculations that serve as practical rules for investors and wealth‑builders. He begins with the Rule of 72, a quick formula to estimate how many years an investment will take to double based on its annual return, illustrating it with a $200,000 investment at an 8% return. Next, he explains the 1% Rule for rental properties, stating that monthly rent should be at least 1% of the property’s purchase price, and provides examples across various property values. He then moves to the 4% Rule for retirement planning, describing how withdrawing 4% of a retirement portfolio (adjusted for inflation) each year is projected to sustain a 30‑year retirement, using $1 million and $5 million portfolio examples. Finally, he covers the capitalization rate (cap rate) calculation—net operating income divided by property value—showing how it gauges real‑estate investment returns and can be rearranged to solve for missing variables. Throughout, Brian emphasizes the rules as quick, mental‑calculation tools, acknowledges their limitations, and ends with a reflective question prompting listeners to apply, deepen, and teach these concepts in their own wealth‑building journeys.
Chapters
Thank you for joining me today. It's Brian Gubernick, and welcome to the No Days Off podcast, where we believe that every single day brings a new opportunity to get better. Let's get into it today. I want to get better at finance, at wealth building, at investing, and I want to do so By talking around 4 rules, some basic rules, basic calculations, things that you could begin to utilize or continue to utilize to make yourself a better investor, someone that's planning for their future, creating a retirement, ultimately retiring, living the life exactly that you want to be leading at that time. Okay. The first rule I want to talk about, many of you are probably familiar with it. It's known as, it's known as the rule of 72. Now, the rule of sub— of 72 is a really, really basic formula that's used to estimate the number of years it's going to take for an investment to double in its value. Here's how it works. You take the number 72 and you divide it by your expected annual return, and that will math out to roughly the number of years it will take for that investment to double. So I'll give you an example. Let's make believe you've got an investment that's worth $200,000 today, and you have an expectation that that investment's going to return 8% on an annual basis. If you divide 72 by that 8%, by the number 8, that equals 9. Therefore, it's going to take 9 years for that investment to double. The example here was $200,000. So in 9 years, that $200,000 property or investment is going to be worth $400,000. Now it goes without saying that the higher the rate of return, the fewer the number of years it's going to take to double. The lower the rate of return, then the greater the number of years it's going to take to double. This is a really, really great rule, a really simple, simple formula that anytime you know an annual return of an investment, you can say, hey, I know it's going to double in value in this amount of time, just based on that, that, that data that you have. It is a quick analysis and it's pretty darn accurate. It may start to vary as rates get a bit higher, or you're talking about longer periods of time, but I'll tell you, in terms of it being quick and useful as an approximation for mental calculations that maybe you're doing in your planning, it is amazing tool. The next rule I want to discuss is known as the 1% rule. This is used in real estate investment. Simply put, the 1% rule is just a general guideline in real estate investing that helps investors like me, like you, evaluate whether a rental property may or may not make sense for you. The way this rule works, your monthly rent on a property should be greater than or equal to 1% of that property's value. Let me repeat that. The 1% rule is stating that your monthly rent is greater than or equal to 1% times the value of that property. So let's, let's go through an example. If I have a property that is currently worth $200,000 and I want to honor the 1% rule, That rent on a monthly basis has to be $2,000. Follow me? Because 1% of $200,000 is $2,000. So the 1% rule, you want $2,000 in monthly rent on a $200,000 property. $250,000 property, $2,500 in rent. $700,000 property, $7,000 per month in rent. Now again, this is just another, you know, rough guideline, rough calculation. It's not necessarily a strict requirement, but I'll tell you in my experience, if something honors the 1% rule, more oftentimes than not, that is going to make for a worthwhile investment, a worthwhile real estate investment, even after factoring in the other costs of owning the rental property like management fees or Property taxes or insurance and all the other things that, that add up. The net is still going to make sense for you if you're honoring that 1% rule in most areas throughout the country. Now, since we're talking about rules and I just gave you the 1% rule, as well as the rule of 72, I want to talk about the 4% rule in retirement investing. The 4% rule is actually a guideline that's used for retirement planning. And it allows for you to determine what is considered a sustainable annual withdrawal rate from your total retirement, from your retirement portfolio. So this is a concept that's become pretty popular, uh, over the years, especially as of late. Uh, Simple Path to Wealth is a great book that describes the 4% rule in detail. But I guess the easy way to put this, 4%, what all we're saying is if you start with your retirement portfolio, You're allowed to withdraw 4% of that amount in the first year of retirement and then adjust in subsequent years by, uh, for inflation. But you're able to withdraw 4% on an annual basis plus inflation of a portfolio balance, of your retirement portfolio balance. And the rule states that if you're withdrawing 4% under normal conditions that your retirement will last at least 30 years. It will last for a 30-year retirement period before you deplete your savings. So let's work through an example. Okay. Let's make believe you have a retirement portfolio of $1 million. The 4% rule, you know, we take 4% of $1 million. That would mean that we can withdraw on an annual basis, $40,000 from our portfolio, and that will last us the 4% withdrawals plus, you know, adjusted for inflation. So 4% this year, but then with inflation, maybe it's 2 or 3% inflation. So that makes it say 4.1 or 4.2 in future years, 4.3. See what I'm saying? So we're compounding with, with inflation there, but let's just say 4% for sake of calculation. $40,000 can be withdrawn every year. For a 30-year time period, and it's expected that you will not deplete your savings for that 30-year period. So you can comfortably withdraw 4%. Now, this assumes that your portfolio has a pretty even balance and a conservative balance of stocks and bonds. So it's a balanced portfolio. And of course, financial situations can change. Lifestyle needs may vary, market, market conditions change, but over the course of time, history would show that this 4% rule is a very, very accurate one. Another example, let's say you accumulate $5 million at retirement. Now we're saying we can withdraw 5%, I'm sorry, $5 million times 4%, which is $200,000. You can live on $200,000 a year and it will last you 30 years before you deplete that portfolio. So of course, it's a little bit more complicated than that. There's more that moves around in the market and in your retirement, but it is an incredibly solid baseline, and you can assess your financial situation today and use this as a rough estimate. If you know you have X dollars saved, you can multiply that by 4%, and you can ask yourself, can I live the life I want to live on this withdrawal amount and do so for 30 years? And if the answer is no, well, you sure as heck better go accumulate a greater nest egg, a greater retirement, or just plan on working a little bit more to supplement your retirement with, you know, the withdrawals that you're making. Now, the very last equation I want to talk about is a little bit more complicated, uh, an equation, but I think it's one that we all have to know, especially if we're in the real estate investment game. And that is the capitalization rate equation, cap rate. We'll just go with cap rate because I could say that. Cap rate equals the net operating income of a property divided by its value, its acquisition costs or its market value. And that times 100 to turn it into a percentage. Okay? So cap rate equals net income Divided by value of the property times 100, and that will tell you your cap rate. Now, what do you do with a cap rate? What is the point of having a cap rate? The point is so that as an investor, you can assess the potential return on a real estate investment and compare it against other investment opportunities. So a higher cap rate usually means a higher potential return, but it also may come with a higher risk. So if you're in real estate investment, you may hear, Hey, I want a 6 cap. I want a 7 cap. I want an 8 cap. What you're saying is the net operating income of that property divided by its value equals 6% or 7% or 8%. Follow me? So you can play with these numbers and calculate obviously cap rate because it's divided, you know, cap rate equals net income divided by market value. But you could also figure out, we could go back to, you know, uh, high school algebra and use that equation and move it around. And in doing so, we can figure out, you know, what net income, net operating income is if we know our cap rate and we know our market value, or we could figure out what market value is if we know our net operating income and we know our cap rate, right? So different ways to maneuver or manipulate this equation to solve for the missing variable. Cap rate's something I want you to dig into a little bit more because if in fact you're going to be a successful real estate investor, you've got to thoroughly understand this calculation. This is not typically one you do on the fly or do in your head like you were able to do with the others, but this is one of the most important calculations one must do if we're going to be successful in real estate investment. So the focusing question for everybody today as we wrap up: I shared 3 rules and 1 calculation, 1 equation with you here today. How can you best leverage these things that you've just learned in your investment, in your real estate investment, in your wealth building journey? Which of these rules do you have to better understand? And can you go research and learn a bit more today? Which of these rules, if not all of these rules, can you turn around and begin to teach to others so as to solidify your understanding and your knowledge of all that we discussed? That's all I have for you today, the No Days Off Podcast. Thank you so much for listening, and remember, every single day brings a new opportunity to get better. So let's get after it.
