You’re used to economic predictors and prognosticators discussing an asset’s return on investment, but Jason Hartman has coined a term that brings a knowing smile to the lips of those already taking full advantage of the situation. We’re talking about your Return On Inflation (ROI) and, if this is the first time you’ve heard of it, pay attention.

Hopefully you’ve progressed far enough in the AIPIS education model to realize that income property is best purchased through the strategic use of long-term, fixed-rate debt in the form of a mortgage that runs thirty years or more. This is how you lock in today’s dollar value. Now you’re going to rent out the property at whatever the market rate is, let’s say $750 per month. Time goes on, inflation continues to reduce the buying power of every dollar in your pocket but keep in mind that something else is going up – namely the rental rate of the property you own. You are raising rates annually to keep up with (or slightly ahead) of inflation, right?

Don’t feel like an evil ogre when you raise rent. Tenants might not like it but they accept it. If they don’t, they’ll move. Working in your favor as a landlord right now is that, generally, demand for rental units is high, which pushes prices higher. Thank the recession and wave of foreclosures for this fortunate happenstance of events. You probably shouldn’t “thank” the recession/foreclosures too loudly but, if it’s going to happen anyway, why not make the most of it for yourself and family’s financial security?

The end result is that the flow of cash dollars through your hands increases to keep up with inflation, while the real value of what you owe on the loan principal goes down, down, down, thanks to that very same inflation. Add “Return On Inflation” to the already multiple ways you’re profiting from income property investing, and a good thing just got better. While stocks, bonds, gold, and other assets are in the process of losing value to inflation, real estate, when done properly, keeps chugging away, creating wealth, increasing your personal fortunate to better withstand the day that hyperinflation arrives. At that point, the only thing of value in this world might be assets unrelated to cash. Like the ground under your feet.

The AIPIS Team

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