Some things appear to make your life better, but don’t. Think “autocorrect”.
Oppositely, some things appear to make your life worse, but don’t, like “good debt”.
Real estate investors love good debt even more than that feeling of opening the pickle jar on the first try.
Debt is good when either:
- Your payments are 100% outsourced to tenants – principal and interest – in a cash flowing property.
- Your mortgage interest rate is lower than inflation. This means that dollars are being debased faster than your interest expense can accrue.
If inflation is your dollar’s diminished purchasing power, then understand that inflation debases debt and equity at the same rate.
Say your $500K property contains $300K in equity and $200K in debt. At a 3% inflation rate, then after just one year …
… your $300K in equity is worth $291K. That’s bad!
… your $200K in debt now only weighs you down $194K. That’s good!
This is why savvy real estate investors make low down payments at purchase.
Over time, one regularly harvests their equity; capital is set free through cash-out refinances, home equity lines of credit, and tax-deferred exchanges.
Dead equity rots in the field like blackened bananas.
From physics, power is work divided by time. Money is a claim on your work over time.
Theft is the opposite of work. Theft creates no value.
Theft only steals the value of your work; that’s what inflation is.
You must store the value of your work free from inflation (theft).
To turn the tables and profit from inflation and good debt: Borrow. Massively.
Ken McElroy and I shot a new video together on how real estate investors profit from inflation:
People don’t think about inflation as much as they should. This is because it’s invisible.
You’ve never seen an “inflation bill” alongside your tangible electric bill, internet bill or Netflix bill.
Inflation is an invisible tax. It’s a stealthy thief.
Now you know how to be a stealthy profiteer.
In fact, it gets even better than this. You might remember how I coined the Inflation Triple Crown.
It really hits home for a lot of people. It’s how you profit from inflation three ways simultaneously.
This is “make money in your sleep” stuff. Here’s the Inflation Triple Crown video.
To me, securing more good debt is even better than guessing my password on the first try. It’s that satisfying.
Get wealthy in your sleep by borrowing to profit from inflation.