Debt is treated like a four-letter by many financial gurus out here.
In reality, debt is an actual asset.
We’ll be the first to concede that consumer debt is a no-go.
The mainstream financial experts are right about that.
Most people who incur consumer debt do so by buying items and services whose value depreciates significantly.
Rational individuals should avoid consumer debt at all costs.
Now incurring debt to obtain an income property….
….totally different ball game.
Income property debt is heavily favored by the tax system.
Any individual serious about growing their wealth should incur debt with the aim of getting their hands on multi-dimensional asset classes such as income properties.
People wonder “how does this process work? It seems too good to be true.”
It’s as simple as heading to your local bank and telling the loan officer that you’re going to make a 20% down payment for a property. From there, you ask the loan officer to loan you the rest.
Provided that your credit history is on point, the bank will likely extend you a loan.
Naturally, you’ll add loan debt that eventually must be repaid.
But there’s a way to take advantage of this scenario for your benefit.
First off, you rent out your property to a tenant who subsequently takes on the carrying costs of the mortgage.
As time progresses, the mortgage’s real value depreciates due to inflation.
The big bank gets the short end of the stick, but you get a fantastic deal in return.
That’s one of the benefits you get from inflation.
When you peel back the onion, you realize that assets such as income properties appreciate at a faster rate than inflation.
That’s the beauty of Double Inflation Arbitrage.
It’s part of the broader phenomenon of inflation-induced debt destruction.
In inflationary environments, incurring debt works in your favor.
So when you hear some financial “guru” attack the idea of accumulating debt, always make sure to view their comments with skepticism.
If they’re referring to consumer debt, they’re right. But if they’re talking about real estate related debt, they’re off the mark.
Anyways, our very own Jason Hartman sat down with macro heavyweights George Gammon and Ken McElroy to discuss predictions for 2023.
Spoiler alert: They all have high hopes for real estate in 2023 and beyond.
Find out more about their economic prognostications by tuning in to their video here.
P.S. 2022 is coming to an end and it’s time to pause and reflect about your accomplishments and struggles alike.
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