Beating Inflation...

Have you ever heard the story about the guy who fell asleep and woke up 30 years later? He went to a payphone to call his banker and found out that his portfolio of investments was now worth over 1 million dollars. At the end of one moment on the phone, the operator came on and said, Please deposit $10,000 for the next 3 minutes. Now that’s inflation!

 By definition, inflation is a steady rise in the level of prices related to an increased volume of money and credit resulting in a loss of value in currency. Simply put, it’s the cost of goods and services going up. Also, every time the government prints more money (which they do on a regular basis to pay their bills) your money and mine is worth less. That is, we have less purchasing power. If you want to really see inflation first hand, just go to the grocery store.

I almost wet myself the last time I went to buy grapefruits-AND I live in Florida!

So how do you beat it? Buy leveraged real estate under good terms and hold onto it! Buying well-located properties in the path of progress has made more people wealthy in this country over every other investment. You see, the rental income you collect will eventually pay off your mortgage. By leveraging the property with seller held financing or buying the property with other good terms of financing, you will have an asset that goes up in value preserving your initial investment. For example: If you bought a property for $80,000 in 1995 and put $10,000 down, you would have a property with a $70,000 mortgage on it. Fast forward to 2008 and depending on the term, that mortgage balance could be down to $50,000. That benefit for the principal balance of the mortgage being paid down is a result of amortization, an excellent benefit to acquiring leveraged real estate. If the value of the property is now $160,000 (13 years later) that is a result of appreciation which is impacted by inflation. Even though the cost of goods is more 13 years later, you have benefited tremendously by the use of financial leverage on a well-located rental property. Now, how would you feel if you did that 10 times?

One of the best bets out there for beating inflation is to buy and hold leveraged rental properties in the path of progress.