Flip and Danny explain how inflation erodes savings but benefits debtors. They show how a 5% return minus 3% inflation leaves just 2% real gain, then cover strategies like low-rate mortgages, inflation-linked rents, and private lending to actually profit from rising prices.
Hey everybody. Flip and Danny here, founders of the Freedom Real Estate Group family of companies.
And welcome to another episode of Freedom through Passive Income.
That's right. And now today's episode is titled Inflation Profiting.
Yes. And so I love this topic because it's one of those topics you don't hear about a lot. And a lot of people, just like in our 401k episode, they aren't thinking about the long term gain. And we know this from experience because we've been in that seat, we've been investing in 401ks and we filled out the questionnaire and we didn't know what to do or what it was returning or anything. Inflation's the exact same thing. People don't who don't talk about it or study it. They don't know how it's eroding the dollar and your interest rates in terms of what you're getting. So they think I'm getting 5 to 8% in my mutual fund and they are all excited about it. But then there's 3% inflation. So they're actually getting like 2 to what, 5%. And that's not very 2 to 6. Yep, 2. 2 to 5. We're doing a math thing right now. So 8 minus 3 is 5.
Yeah, see, that's what I said.
I love these. So anyways, the risk of not understanding inflation is that you think that you're doing everything right. You think that interest rates and what your returns are, are, you're not paying attention. And quite frankly, for the past probably I'm going to say 10 years, ish, there has been kind of a stable environment of inflation. But we all see that, you know, it's starting to go up now. And depending on when you're watching this video, you know, look at the environment that you're in because this is important thing to watch because inflation is always a part of the game and something you need to be paying attention to. And you're not going to get that comfortable retirement that you're hoping for if inflation is eroding the dollar and you're not able to buy the same thing in terms of goods and services that you can today. Bucket of money, you think that's going to take care of you for the rest of your life in the future when you're ready to actually start spending it. So it's really important. So we're going to talk about who gains from inflation to just give you a little bit of education of the position you strategically want to find yourself when you're thinking about Inflation.
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Yeah. So again.
So debtors. So this what, this is partly why we say some debt is good, not bad, because especially a mortgage loan with low interest rates, it's good because the dollars that we're paying the mortgage back on in the future are worth less. So it's going to be, it's deflating what we're actually paying back in terms of the power of the dollar. So taking on good debt is always an important thing. Real estate investors, for those of us who have properties, rent increases are typically tied to inflation. So we our rent as inflation happens because hopefully people are also making more money. That's a totally different topic and we could go on and on and on about that. But rent increases are tied to inflation, so typically you can keep up. So that's a way to profit off it as well. Now companies, if you're investing in the stock market, companies that are able to raise the prices of their goods and services are going to be something good to invest in. Now, I'm not an expert in this. I love real estate. That's what I want to be doing and where I want to be, you know, as much of an expert as I can be. But think about that. When you are investing in stocks, if you are, you know, can they increase their price of goods and services or are the cost of their goods and services increasing so much that they can't pass it on to their buyers? A good example of this is home builders. So home builders, right now, the price of lumber, let's just take that for example, it's rising. But our cost of the product in the end is also rising. So we are able to pass along the cost that we're incurring to our end buyer. So we're okay. But if there's a company where they can't pass on that cost, especially if there are foreign investors as your competition. So if somebody in a different country can produce the same thing as this company is producing, then you're just, you're out of the game. Think about those things. When you're thinking about inflation and what's happening and the types of, you know, vehicles that you're going to be investing in. So as an example, we talked about this in another episode. If you're getting a 5% return and there's 3% inflation, then you're actually effectively getting a 2% return. Right. And so we call inflation the hidden tax that raises the price of everything and erodes your savings. So again, your savings. If you're getting 2% return, how much are we getting in savings?
Not 2%. It's like.000, 2%.
Okay. So we're losing money right now in our savings account. And so that's the point. If you're lucky enough to get 2% in your savings account but inflation is 3%, you're still, you're losing 1% of that money. So that's why savers lose money. Stock investors maintain their wealth. Real estate investors build their wealth. Yeah. So you want to be able to diversify and look for strong interest returns in solid vehicles. So the things that we all the time, because this is what we're good at and this is what we know, it's what we're going to share with you. Private money lending, you're getting 6, 8, 10% on your return. So that 3%, no big deal funds, you're getting 6, 8, 10% on your returns. That 3%, inflation, no big deal syndications, you're getting 7, 8, 9, 10, 11, 12 sometimes plus you're getting tax benefits and depending if you're using your 401ks and self directed IRAs and all those funds, you've got stack tax advantages over there. All of that impacts what your actual return is in the end. So think about all of those things. That's what we wanted to share in this episode because it's not a topic that people talk about a lot. And we want to make sure that we're educating you best we can so that you can start strategically thinking how you get to that freedom number and how you start building your passive income.
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There's. I love loves.
But make sure you give us reviews. Our reviews, comments, questions. I'm sure there's gonna be a lot of questions about when she just went through.
That's what that Facebook group is for. Exactly.
Exactly. So, again, we hope you enjoyed this episode, but we always like to end with invest smart, live happy. Bye, everybody.
Bye.
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