So.....what is your bet?

Question

I am typically very conservative when it comes to taking on debt and over-leveraging myself. But I can't help but think about the currency inflation the Federal Reserve and government have been pushing the past few decades. With the insurmountable national debt, the absolute worst fear of the Fed is to allow deflation and they will do anything to prevent it...including inflate/hyperinflate the dollar. They can't afford to let it go any other way.

Should this be our future, it would be very advantageous to acquire a lot of property now and let the ensuing inflation erode away the debt. The risk-averse side of me says no way could I take this gamble, but still I wonder.

So...what is your bet?

Should this be our future, it would be very advantageous to acquire a lot of property now and let the ensuing inflation erode away the debt.  The risk-averse side of me says no way could I take this gamble, but still I wonder.

So...what is your bet?

Jacob Sampson · Answer

If you have figured out a great formula for investing in your markets then you stick to that formula.  If inflation happens you'll do great.  If it doesn't you'll do great.  If you take on a ton of debt and inflation doesn't happen or doesn't happen as quickly as you want you may put yourself into trouble.

I spend far more time trying to minimize my downside vs trying to maximize my upside.  The upside tends to take care of itself, the downside can take you out of the game.  No bet is worth being taken out of the game.

Edward Liu · Answer

Don't bet!  Either way.

Your scenario is not something I worry about.  Just focus on finding good deals in good or bad times.

Jill F. · Answer

We have everything leveraged at least 25/75 because that's what our commercial lender will do. We also have shorter term seconds on a couple of properties where the previous owner is holding a note when seller is willing and rents will support it. We are looking for COC return and an income stream now. A hyperinflation situation would be disaterous for everyone-- and the tenants are paying off the mortgages in any event. I sure hope hyperinflation or any type of systemic country-wide financial melt down doesn't happen in my lifetime (or my childrens lifetime...)

So.....what is your bet?

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