How Real Estate Investing Protects Against Inflation

ao - I believe that homes, food, education, healthcare, communication, retirement, transportation, and a few other things not mentioned, should not be allowed to be used as “investment” opportunities. Otherwise they WILL eventually become unaffordable for the average person.
Your list of what is already “available” to the bottom 75% of the population is fantasy land and the reality is ALL of those things are becoming more expensive and not because of inflation but because of “middle men” demanding their cut. All of those things are also, for lack of a better descriptive, undergoing crapification for all but the wealthy few.
My extended family and their circle of acquaintances are very wealthy indeed and I have found myself somewhat banished for forsaking that path. I grew tired of hearing “if they can’t afford _______ then maybe they don’t deserve it”.
You ask what I believe. I believe in the beauty of humanity and all of the natural world.
What I know for certain is that if we continue on with the cherished norms that you obviously believe in the world will continue to become violently and ugly.

You may be thinking of a large scale real estate investor or a real estate investment syndicate.  Even then, if they’ve incurred debt, they usually have some skin in the game.

For the small real estate investor, the individual who rents out a second floor of their home, an apartment over their garage, the other half of a duplex, or a single house or two, let me assure you, they almost always have skin in the game.  I know with my small commercial real esate investment, I certainly have skin in the game.

Let me ask you this.  If you have a mortgage on a private residence, do you have any skin in the game?  You bet you do.  If you bought a car on a car loan, do you have skin in the game?  Absolutely.

Can you explain your rationale for how you perceive the “landlord-rental business” is, as you term it, a Ponzi scheme?  From that statement, I wonder if you understand what a Ponzi scheme actually is.  And from your post as a whole, I also wonder about your degree of financial and economic literacy.


What DO you think someone should be allowd to invest in?  Or do you think investments should be banned altogether?

I don’t like being put in the position of defending the present system as I recognize and am certainly not immune to many of its problems.  But I don’t see your way of thinking providing any workable solution.  Your response was, quite frankly, vague and imprecise and inaccurate to boot.  To say,

" … ALL of those things are becoming more expensive and not because of inflation but because of “middle men” demanding their cut."

flies in the face of reality and suggests to me that perhaps you should go back and review the Crash Course in its entirety.  I’m curious.  Have you even bothered to watch it? 

ao - I need to stop now as I do not do this for sport but I will say if you don’t understand;
" … ALL of those things are becoming more expensive and not because of inflation but because of “middle men” demanding their cut."
Then I have no hope of communicating with you.
I communicated with Chris before he even put the Crash Course together and while I don’t agree with everything of his I do believe the above statement I made is well in line with the concept. We will/are experiencing “peak everything” and the basic thinking is that that means everything will just become more expensive so from an investment perspective it seems fairly clear. I believe, and so far have been close to right, that peak everything means the economy shrinks and fewer people can afford anything so prices stay even or go down. The other effect is that “assets” become less liquid. How much is something worth? It is worth whatever someone can afford to pay for it. I know you know this, sorry for being obvious. Also I want to be clear I am not talking about stagflation. I am talking collapse with lots of suffering and death.
We had a pol back in the oil drum days that went something like this;
Do you believe ultimately oil will go to$ 50 and we muddle through or to $100 causing the global economy to collapse?
Some of us said it would only go to $50 but fewer and fewer people would be able to afford it until the economy collapsed.
I think part of the problem here is I tend to think on an all of humanity perspective, I just can’t do otherwise, and I believe you are talking an Amerocentric perspective.

I totally agree about the math - buying a property with borrowed money, with presumably enough rental income to cover the payments, and letting inflation eat away at the debt over the next 20 years. You just need to defer enough spending to make the down payment (not an easy thing), and also have a cushion for the vacancies which can appear - especially during the bad times.
From my limited experience though, rents don’t cover mortgage payments. You have to feed the property. My dad called it “an alligator.” It takes 5-10 years of inflation to make the bite stop hurting.
But in the end, it worked out. I saw it. It was a good plan. It did require a whole lot of savings. And a reserve for repairs, vacancies, and accidents. And definitely, take care of those reliable tenants. If they have a rent issue one month, its fine. As long as its not a regular thing, flexibility is just a good idea. Vacancies and uncertainty are far worse than the occasional burp.
But now, with the whole “no evictions” thing (but no holiday from mortgage payments for the small landlords), the small landlord would seem to be in quite a pickle. How many more years will this go on?
If the government wants to make it so the tenants don’t have to pay, they should give that same gift to the property owners for their mortgage payments. And why not do this for all loans? Cars, boats, planes, rentals, houses. Everything. Unless, of course, this is just a squeeze designed to destroy the savings of the middle class by bankrupting them and/or forcing them to sell their properties at a discount, thus making their properties available for purchase by the big companies and hedge funds. Like what happened in 2008.
Perhaps - once “enough” of the wealth transfer has happened, the eviction requirements will come right back online. “Surely you didn’t think this would last forever?”
What a wonderful set of coincidences for the hedge funds. How lucky can they get?
“You won’t own anything. And you’ll be happy.”

When Ben was in France he handled a lot of America’s money. He was amazed by paper money. In Chapter 21 of Van Doren’s biography, Franklin says:
"The effect of paper currency is not understood on this side of the water (France). And indeed the whole is a mystery even to the politicians. how we have been able to continue a war four years without money and how we could pay with paper that had no previously fixed fund appropriated specifically to redeem it. This currency, as we manage it, is a wonderful machine. It performs its office when we issue it; it pays and clothes troops and provides victuals and ammunition; and when we are obliged to use a quantity excessive, it pays itself off by depreciation. "

Sorry, no. There is this thing called personal responsibility. I believe in a safety net but when the same people keep using the same net constantly and they are perfectly capable of fending for themselves and choose not to, that is a real problem. Also, no I do not own rental property. No, I was not born into wealth. I busted my ass for everything I have. I was born poor. I went in to the military for the GI Bill and used that to get a good degree. Now I work 60+ hours per week, pay my bills, invest, save money as well as donate to charity. Many rental homes are not owned by slum lords or big corporations. They are owned by people who are normal middle class people. Not everyone buys rental houses for investment. The guys I know at work who have some got them by death of parents or moving but unable to sell the house in previous location in a timely manner so they started renting it out. In all cases I know they are now very worried about this economy and what this could mean to them.

Perhaps - once “enough” of the wealth transfer has happened, the eviction requirements will come right back online. “Surely you didn’t think this would last forever?”
What a wonderful set of coincidences for the hedge funds. How lucky can they get?
“You won’t own anything. And you’ll be happy.”
IMHO all part of the plan. This would be the easiest way to that objective of the masses not owning anything. Then roll out CBDC right in time, UBI of just enough to have nutrient depleted food, clothing and a most likely dilapidated roof over your head. Centralized control achieved. There will be most likely the 1% and the 10% that do still own something. Historically the 1% use the 10% to enact their control and keep a buffer between them and the masses. I am not a socialist, dare anyone accuse me of that. I believe in true free market capitalism.
But we have not had that in a very long time …

I think what we’re seeing in this discussion is another example of the “divide and conquer” strategy being used to impoverish us all. We are the 99% debating over who gets the last of the crumbs, blind to where the rest of the loaf of bread is.
The elephant in the room, the connection that people are not making, is that there will NEVER be a fair system of debt/ownership/rental for the masses when the elites start owning everything.
The problem isn’t that hard working middle class investors are finding it hard to make money off their risky real estate investing; the problem is that they find that they have to make those risky investments in order to get ahead. The problem is that there are not enough jobs / wages in relation to real estate prices to allow renters to buy their own properties, when at the same time there is an overabundance of housing in N America. There is absolutely no fundamental reason whatsoever why everyone who isn’t a complete screw-up couldn’t, and shouldn’t, be able to own outright a house without any debt. The fact that we are all squabbling over who has it worse – the tenant or the landlord – only speaks to the depravity we have increasingly been subjected to over previous decades as the financial system owned by the elites has forced a system of debt serfdom on us all whose ultimate goal appears to be to remove personal ownership of anything of significance. Why do you think interest rates are so low? Could be part of the plan to enslave us all?
This transition has been slow enough that few of us actually see it or understand it. We just complain of increased cost of living of everything especially housing and blame it on Peak Oil or money printing (well, money printing is a part of it, yes). Well the Peak Oil argument doesn’t work because housing was built before oil became scarce (and it isn’t scarce yet).
Come on people, let’s identify this for what it is. It’s the emergence of neo-feudalism. Ask this question: There is a huge amount of wealth in N America. Who owns it? Renters don’t, by definition. Middle class landlords investing their lives into real estate don’t own it either because they are in debt to the banks; so the banks own it. Who owns the banks? Who owns the farmland, factories and stock market? Not the 99%! No society ever functions that has such a huge disparity in wealth ownership. It’s not about renters-vs-landlords – think bigger!

I only want to say we live off our rental income quite well. Thankfully have not had any doors go net without catching up. only 3 asked for rent deferal, but all have caught up. All are long term families with dogs (our business model).
We own many doors in the Atlanta and Chattanooga area but in general I’m happy to help new investors get started anywhere. I’ve been offering education in my local REIAs and on line orgs like (Curt Smith profile).
We live in a time where we should not believe everything we hear, even here. Do our own research, join expert orgs like REIAs. Take education. Talk to RE experienced CPAs (not all CPAs are equal) and decide for your self if one investing avenue is for you or not.
We have done very well owning a bunch of rentals. I have a paper I’m happy to share; How To Buy a Bullet Proof Rental Porfolio. If you follow the simple but non-intitive business rules you’ll become like us, the maytag landlord. Little to do except to answer the phone (texts actually) re the AC is broke, or the septic tank is full etc etc. Its easy to collect rent checks (electronicly via and call contractors to fix stuff even remotely while traveling. If you use google voice phone number you can even be on a cruise ship and no one will know or care (when that was possible last year).
Stop digging up reasons why something might be a problem and figure out how to make it happen. – do what others won’t – There’s a good living in doing things others won’t or can’t. IE the now free book; Think And Grow Rich.
Best to all, take care. Curt /

Mysterymet - You proved my point. “If someone can’t afford______ then maybe they don’t deserve it”.
Yes some people abuse the safety nets and millions are lost. The average person accessing safety nets actually do need them at no fault of their own. Just as many or more abuse the finance/banking/taxation system and trillions are lost. People in need are not the reason that education is crap and expensive, that healthcare is crap and expensive, that US infrastructure is crap, it is the wealthy and corporations demanding their piece of the action then skipping out on paying their taxes.
I recently heard an interview of a very wealthy German who was asked how he can accept paying 60% or more in taxes and he replied angrily "because I don’t want my country to become a shithole country.
No one buys a home any more they buy an investment vehicle. Where I live with 2 to 5 acre min lots and several larger farms, several of the houses around me have turned over 3 or 4 times in just the last 10 years. The people who buy them mostly have kids but have zero interest in getting to know their neighbors.
I feel sorry for your friends who received a free house and might not get lots of money out of it. I rented a house in town 10 years ago for 5 years, I also did all the maintenance, landscaped, and more paid a total of $70,000 over that period then learned that the landlord got the house for free then paid paid $15,000 to get it up to snuff before renting it to me. Not complaining but am sick of hearing landlord complaints.

You may be thinking of a large scale real estate investor or a real estate investment syndicate. Even then, if they've incurred debt, they usually have some skin in the game.
As opposed to the renter who has his entire epidermis, muscle tissue and bone in "the game." So much of current investing by people trying to get ahead, as MarkBC describes, relies on making moral compromises. This has always been the case, to some degree, but now it is ramped up to the extreme. Curt504.
Stop digging up reasons why something _might_ be a problem and figure out how to make it happen. -- do what others won't -- There's a good living in doing things others won't or can't. IE the now free book; Think And Grow Rich. --Curt504
Wow, you make the impossible sound so easy! This mentality is everything that is wrong with the U.S. There are work arounds but very very few, and as people exploit those, the initial cost of ownership is driven up even more. Again, hat tip to MarkBC. My husband partnered with a couple of people in the eighties to create a real estate corporation. The amount of money to get in was ridiculously low, the cost of real estate, very very low at the time. This situation is not possible to duplicate anywhere in the developed world, currently.  

Having been a Real Estate broker that bit of hyperbolic nonsense was pretty easy to spot. This is capitalism , or sort of. Yes a house is an investment, for most the largest they will ever make. I was a landlord for 10 years. Let’s sit down and have a cup of Chai and I will share some of the finer points of being a landlord.
For the vast majority that house is a home. For many in 08 the investment thesis went up in a puff of smoke and many innocent homeowners lost homes and equity. A landlord puts up his capital and takes on risk. You don’t like that your former landlord got a house for free, put money in it and rented it out for a profit? You gonna love what’s coming then.

The idea that the government has a humanitarian obligation to allow a tenant to not pay his landlord -- Brushhog
During a pandemic? You would rather see the streets everywhere lined with the homeless? I am not sure if you are quoting me or not, but I did mention that governments had to intervene during the pandemic. The 'investor' has access to interest free govt. loans to pull him through. Why should investors have equal access to govt. help? They are investors. If you lose money in the stock market do you expect to be bailed out? You should not be living so close to the wire, as an investor, that non payment of rent for several months is going to throw you into a financial ditch and ruin your life. Only invest what you can afford to lose. If you have mortgaged your own home, to buy others and the markets turn on you, that is really sad, but it is a consquence of going out on a limb and handing the banks way too much power. Think and grow rich, is a fine maxim, when things are going your way, but how many people were crushed by it by overextending themselves during the financial crisis. When I read responses to my comments, like yours, Brushhog, I am so so happy I have experienced extreme poverty in my life, so know exactly what renters are up against today.
Having been a Real Estate broker that bit of hyperbolic nonsense was pretty easy to spot. This is capitalism , or sort of. Yes a house is an investment, for most the largest they will ever make. I was a landlord for 10 years. Let's sit down and have a cup of Chai and I will share some of the finer points of being a landlord.
If part of the urgency to buy a home is to shelter dollars, due to asset inflation and misallocation of capital, it becomes, at the very least, a vehicle for wealth preservation. This was not true in my parent's time. You bought a home to live in and it might appreciate a little during the course of a life time, but it wasn't purchased as a requirement to avoid potential financial ruin.  

The most successful recreational rail estate investor I knew, would pay down his mortgages, then “refinance” and pocket the differential, always maintaining debt. Never really appealed to me. Most of my friends had spotty success (and failures, some catastrophic), mostly because I think it requires a lot more attention than it seems.

But you certainly managed to avoid answering most of my questions and then came up with the “flipping over the table” statement of: “I have no hope communicating with you.”

Plus, when I’m talking apples, you start talking oranges. 

I’m not saying this is so in your case but in so many others who take a similar tack, they talk a good game but the walk is often lacking.  I don’t see many of them giving away their time in volunteerism, actually breaking a sweat to physically help others, giving a substantial portion of their wealth to those in need, etc.    

The most precious commodity one can have is time and I think I’ll preserve mine for some more worthwhile discussions.  Thanks for the discussion and so long.

You say:

"As opposed to the renter who has his entire epidermis, muscle tissue and bone in “the game.” "

I don’t see that at all.  The renter has many choices and can, in the present environment, essentially walk away any time, maybe losing a security deposit at the most (although many of them will select not paying a final rent amount equivalent to the security deposit and so will incur zero loss).

How is that having skin in the game?  Their options are many and their potential losses are negligible to nil.


And I’ve successful applied principles from the book.  But nothing goes as smoothly and uneventfully as you would seem to suggest.  Ole Napoleon had his ups and downs  if you remember.   **** happens and **** is messy to clean up.

Many people around here head south for the winter.  Leaving your own home, much less a rental property, does not always go smoothly.  We had a sewer back up once.  A friend had a roof collapse from heavy snowfall.  Another had a break-in.  Another had a water heater leak.  Another had a furnace go out and pipes freeze.  All had measures in place to deal with such contingencies.  But we live in an imperfect world and things don’t always work or work out as planned.  None of these incidents were resolved neatly and completely remotely.  That being said, those folks still head south every winter and we’d be cruising if international travel were safe and feasible at this time without taking outsized risks.  Life is a full contact sport. 

You may find in soon-to-be-socialist America that those SFRs cease being the fairly reliable cash flow machines they once were. 

Pride cometh before the fall.  

If you were renting a house and doing all of the home maintenance on the place for free you are a fool. Yard maintenance can be the responsibility of the tenant but home maintenance like roofing, hvac, etc is the responsibility of the owner. My friend who inherited his parent’s house did not get a “free” house and want to make a ton of money off it. He inherited the estate of his parents when they DIED. I am 100% sure he would have taken his Mom back in a heart beat. The house was sentimental for him. It was the house he grew up in. He wanted to live there but because of distance from his job he couldn’t. So, he decided to rent it out. In the mean time there is still property taxes, home maintenance, paying off what was left of the mortgage etc. none of that was free. As far as safety nets go there are a ton of people who need them but also a ton of people who take advantage of them. I don’t want to pay 60% tax. Children, sick and elderly should always receive help. Grown adults that are perfectly capable of working but don’t should not.