Epic Real Estate Investing - How Does Inflation Affect Real Estate | 1211

Episode Date: June 14, 2022

Inflation can financially eat you if you are not prudent, but if you are, it can potentially make you wealthy! Therefore, in today’s episode, Matt shares how inflation affects real estate so you can use it for your good!   BUT BEFORE THAT, Matt gives his opinion on the future of the US dollar due to the runaway inflation, the stock market crashing, and geopolitical turmoil. Is the U.S. dollar going to collapse? Stay tuned and hear Matt’s predictions!    Are you ready?   Let’s go! Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terio Media. Is the US dollar going to collapse? I mean, with runaway inflation that we're all watching at the moment, it's not an unreasonable question. And there are some chilling predictions that it is doomed, or is it? Let's take a look. You ready? Let's go.

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Here's Matt. All right, so by the time we're done here, you're going to know what it would take for the dollar to actually collapse. You're going to get five chilling predictions by some very smart people and then the likelihood of it actually collapsing. Now, there are a variety of economic factors that can contribute to a declining dollar. And these include monetary policy, rising prices or inflation, demand for currency, economic growth, and export prices. Most all are currently working against the dollar, except one, the demand for the dollar. You see, when a country's currency is in demand, the currency stays strong. And one of the ways a currency remains in demand

is if the country exports products that other countries want to buy and demands payment in its own currency. So while the U.S. does not export more than it imports, it has found another way to create an artificially high global demand for U.S. dollars. U.S. dollar is what is known as a reserve currency. And reserve currencies are used by nations across the world to purchase desired commodities, such as oil and gold. When sellers of these commodities demand payment in the reserve currency, an artificial demand for that currency is created, keeping it stronger than it might have been otherwise. The biggest thing that could bring the dollar down is if it were to lose its position as the reserve currency. And if it did, real estate is one thing you will want to

own. And if you're still looking to get that first deal under your belt, you might want to join me and a small group of aspiring investors this month, where we'll each get a deal done in 10 days or less, guaranteed. If that makes sense for you right now to join us, get the details at the legendschallenge.com. Now, it's certainly possible for the dollar to lose its reserve currency status, and there are five popular predictions that could cause that.

And I'll get to those in just a second, but there are four things working in favor of the U.S. dollar. The first, it's backed by the U.S. government. That makes it the, the premier global currency. Second, it's the universal medium of exchange. That's thanks to its sophisticated financial markets. The third reason is that most international contracts are priced in dollars.

And the fourth reason is probably the most important. The United States is the world's best customer. It's the largest export market for many countries. Most of those countries have adopted the dollar as their own currency. And then others peg their own currency to the dollar. And as a result, they have zero incentive to switch to another currency. Many in Congress, they want the dollar to decline because they believe it will help the U.S. economy.

Because a weak dollar lowers the price of U.S. exports relative to foreign goods, its products become more competitive. In fact, the decline in the dollar helped to improve the U.S. trade deficit in 2012. Now, although the dollar has declined dramatically over the last 10 years, it has never been in danger of collapsing. But many believe we're currently in a danger zone. And to hedge against the possibility, most experts agree that it's prudent to maintain a well-diversified investment portfolio that includes overseas funds because these are denominated in foreign currencies, which rise when the dollar falls. Smart diversification would also include commodity funds, such as gold,

silver, and oil, which tend to increase when the dollar declines. And of course, real estate. Now, although the dollar has good stuff going for it, there are five chilling productions for the U.S. dollar that you should consider. And if any one of these should come to fruition, you don't want to get caught without owning some real estate. Because it's becoming more and more common for everyday people to recognize that the U.S. dollar is in bad shape. Having lost 97% of its purchasing power in 100 years, it's easy to argue that the dollar has suffered a slow but steady collapse. And many financial experts claim this is only the beginning. In an era when central banks have been printing money with reckless abandon and racking up debts like never before, something will have to give.

For many, the question isn't if the dollar will collapse, but rather when. As the United States plays a less and less significant role in the world economy and a country like China threatens to replace the dollar as the global reserve currency, here are five of the most chilling predictions about the future of the dollar. Number five, classical economist and Harvard professor Terry Burnham told the world that he was withdrawing $1 million from his Bank of America checking account because of the negative consequences Ben Bernanke and Jenny Ellen had had on the U.S. dollar and was trying to start a bank run by getting others to do the same. He claimed that a dollar collapse was also underway because the Fed's manipulations had two adverse effects on the currency, decreasing overall wealth by distorting markets and redistributing wealth from unsophisticated investors to the political elite through the currency. Burnham said he couldn't stand getting paid zero interest by Bank of America anymore and didn't trust them to keep his money safe. At zero interest, he was losing tens of thousands of dollars in purchasing power every year due to inflation, while his well,

well-connected bank benefited. That was his fear. And if enough people adopted this fear, a bank run could collapse the dollar. Number four, billionaire Donald Trump said in a 2014 interview on Fox News that the dollar is on the edge of ruin and an economic collapse is the only remedy. And when asked, when will the U.S. dollar collapse? He said when the U.S. debt hits the $21 to $22 trillion mark, things are going to get much, much worse then. The U.S. debt just passed $30 trillion. You know, many of Trump's comments don't land well when delivered, but more and more, they look less crazy as time goes on. Number three, Jeff Berwick, editor of the dollar vigilante. He predicts that things will get so bad that even the American government will view their own

dollar as toxic waste. He says the average American is in La La Land, obsessing over TV shows or the next presidential race. He says, what happened in Ukraine in 2008 could easily happen in the United States. And while Ukraine saw their currency crisis coming for some time, the U.S. dollar collapse could happen overnight, he says. Burwick further said that the U.S. is turning a corner and headed for total financial ruin. And he often predicts the end of the monetary system as we know it and claims that once all of the capital controls have been implemented and the U.S. government starts confiscating assets to pay creditors like China, it will not even accept its own U.S. dollar. Number two, financial expert and author of currency wars.

Jim Records believes the international monetary system is headed for a total collapse. And he sets the record straight on what an economic collapse is, saying it doesn't mean that we're going to all go live in caves. In fact, he says we've seen three economic collapses in the last 100 years. And records suggest the dollar will see the worst of the next economic collapse as part of the death of money, lamenting that we are on a global dollar standard. He says a fiat currency standard can work, but only if countries inject confidence into the system and welcome businesses with open arms. Of course, neither of those factors exist in the United

States at the moment. And then number one, Russian legislators have likened the US dollar to a worldwide Ponzi scheme, one that will end with the collapse of the dollar. They even submitted a bill to protect Russians against the collapsing U.S. debt pyramid, saying growing rates of U.S. debt would cause a U.S. dollar collapse if spending isn't remedy. This bill would have banned U.S. dollars from circulating in Russia and forbid private citizens from holding Russian bank accounts in U.S. dollars. Now, we know, Russia at the moment isn't in a position to be concerned with something like this, but could another country be like China? Could they follow in Russia's footsteps and actually follow through? Now, given all of those ominous predictions, the collapse of the dollar

is unlikely because, first, there's no incentive for it. As the United States is the largest market for China and Japan, their economies will also fail if the U.S. economy fails. Second, There's nothing to replace it. The doomsayers point to gold, the euro, or Bitcoin as replacements for the dollar as the world's global currency. And China is showing that it would like to go on to become a more widely traded currency, but none of these other alternatives have enough circulation to replace the dollar. You know, Bitcoin has become the currency of choice for the underground economy, and at some point it likely moves above ground, but does it replace the dollar?

I don't know. What do you think? Does the dollar collapse? If so, why? If not, why? And if you'd like to take down your next property by the end of the month, take a look at how we're all going to do it at the legends challenge.com. So you can do it too. Please stand by.

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Let's keep going. Back to the show. inflation affect real estate because inflation like we've never seen in our adult lives is here. And if you're not careful, it'll eat you up financially. But if you play your cards right, it can make you wealthy. And I'll show you what I mean. By the time we're done here, you're going to know what inflation is, how it affects real estate, and further how the rising interest rates come into play and collectively how it all affects real estate investors.

Oh, and by the way, if you're still going to get that first deal under your belt, I put together a free training just for you to help you get that first one. undone. And then I'll show you how to earn $5,000 a month, flipping contracts and properties working as little as one hour a day, and you can access it for free at mat's free training.com. All right, inflation. It's a tough topic to escape these days, meaning there's no shortage of talk and speculation about the forecast of our monetary system in the United States. You know, one expert says that we're going to see high inflation, and the next says we could be headed toward a deflationary environment, and then yet another drops this big, giant word

that most of us have never heard of called stagflation. You know, if we only had a crystal ball, that would be really helpful. But the daily decisions being made by the powers that be seem to be, I don't know, defying logic these days. And that only makes it more difficult to predict what we can expect the monetary policy to be. So for educated real estate investors, it's wise to understand how inflation impacts real estate and how really high inflation, like what we're experiencing at the moment, can affect your assets, your cash, and your debt. Most importantly, how do you protect yourself and the real

estate wealth that you've built thus far? So to make sure that we're on the same page here when we're talking to inflation, you know, it's felt as a gradual increase in the price of goods and services in the marketplace. And I'm sure you're feeling it in many areas of your life right now, you know, food and energy most prominently. What we're really experiencing, though, with these rising prices, is that each unit of currency, our U.S. dollar, is buying fewer products and fewer services. You know, the layman sees inflation as making things more expensive. The more sophisticated person understands that just our money is losing its purchasing power. The inflation rate, the annualized percentage change in a general price index,

is a typical metric of inflation. In inflation, it disrupts the economy's pricing systems. And this forces people, as well as firms, to make less than optimal spending, saving, and investment decisions. Furthermore, when there is inflation, economic players frequently take measures to shield themselves against its detrimental effects, diverting resources away from more productive activities. So in the end, inefficient decisions can diminish earnings, it can slow economic progress, and it can lower living standards. In these far-reaching distortions warrant that inflation is kept low to stabilize the economy and promote the productive

utilization of resources. An inflation rate of just under 2% is considered to be healthy foreign economy. Per the last reading, we're well above that, like four times above that. It's high, and everyone is talking about it. In fact, it could be the one thing that maybe brings this country together, meaning that both Democrats and Republicans are equally concerned about and for the same reasons. You know, inflation, it's an equal opportunity money destroyer, and it doesn't give two bits about your political affiliation.

But that's a conversation for another time. What we want to know is how does it affect real estate? Historically speaking, real estate has always been considered a strong hedge against inflation. For example, in 1979, when inflation reached 13.5% the average dividend income from real estate investment trusts trading on the stock exchange that year, that was 21.2%. In 2011, when inflation reached 5.1%, that same year, annualized returns from those same types of REITs was 8.4%. So once again, real estate investments were a safeguard to investors buying power. And that correlation can be shown time and time again in history with REITs like I just mentioned, and very similar outcomes are recorded

on private real estate ownership as well. It would be easy to compare real estate and inflation numbers from any given point in time and recognize that the appreciation from real estate alone is a hedge against inflation's money destruction powers. In fact, real estate tends to outpace inflation and keep real estate investors in the black when non-owners of real estate are customarily swimming in the rent. But it gets even better for real estate investors. A probable positive during times of high inflation for real estate investors is the appreciation of the real estate that they own. Also, rents from their income properties tend to rise during inflationary times as well. And here's why. During high inflationary times, it can be difficult to get a mortgage,

as many are starting to experience right now. High cost mortgage rates mean buyers have less purchasing power, so many continue to rent instead of buy. This surge in rental demand results in increased rental rates, which is great if you're a landlord. However, it's not all rosy for real estate investors. You know, potential negatives in inflationary times is the increased costs of building materials for new homes. With these increased costs for building, new construction can be a very difficult investment when the economy is experiencing high inflation, not to mention the increased costs of borrowing money. It adds to the difficulty of building new homes, and it adds to the difficulty of acquiring new investments as well.

Banks don't want to get caught with their pants down during inflationary times, so they'll charge higher interest rates and offer fewer loans. But if you could access loans during inflationary times, it can be another checkmark for the positive. And here's why. You see, when interest rates rise, mostly in periods of economic expansion, various asset classes react uniquely.

Rising rates erode the principle of bonds, affect the value of stocks, and other financial assets, and influence interest payments on debt. However, real estate investments have the characteristic of performing well in a rising rate environment. In particular, income-generating real property and multifilies have historically shown a greater ability to grow net income during expansionary periods than securities and other assets. You see, mortgage payments on long-term fixed-rate instruments do not change over time.

In other words, the payments remain constant while income and equity growth accelerates. Furthermore, inflation reduces the value of money owed in the future. That said, advisors and investors should be aware that as mortgage rates rise during periods of inflation, demand for real estate tends to decline as debt becomes more expensive. And that could result in weakening the demand for real estate and can negatively impact asset prices, but then that only impacts a real estate investor if they need or want to sell. Due to the demographic shifts currently underway, specifically millennials maturing to the average age of the first-time home buyer, we're unlikely to see a substantial drop for real estate demand.

We've got too many people, and they've got to live somewhere. Whether they buy or rent, that should translate to favorable conditions for real estate investors. So during inflationary times like this, the favorable investment strategy for real estate investors is to hold. By holding on your investments, you place yourself on the winning side of inflation. One, your rents rise. Two, your property's value rises with inflation. And three, the debt on your asset is devalued. So if you sell your properties, you lose those benefits.

And inflation all of a sudden becomes the same evil force eating up your cash is buying power like it's eating up everyone else's. So you have to earn more money in other ways. Unless you love working, it makes more sense to hold your real estate and let it do the work for you. With more positives than drawbacks, an inflationary environment can be very positive for real estate and real estate investors if they make smart acquisition and management decisions. If you'd like to explore the possibility of working together one-on-one to become a smart state investor, go to

REI-ACE.com, answer a few questions, and then just pick a time for us to hop on the phone and brainstorm some ideas about getting you in position to benefit from these inflationary times ahead. REI-Ase.com. And that wraps up the epic show. If you found this episode valuable, who else do you know that might too?

There's a really good chance you know someone else who would. And when their name comes to mind, please share it with them and ask them to click the subscribe button when they get here and I'll take great care of them. God loves you, and so do I. health, peace, blessings, and success to you. I'm Matt Terrio. Living the dream.

Yeah, yeah, we got the cash flow. You didn't know, home for us, we got to cash flow. This podcast is a part of the C-suite Radio Network. For more top business podcasts, visit c-sweetradio.com.