Jason HartmanCEO of Empowered Investor and Real Estate Tools

The Hidden Truth Behind Property Investment!

Name: The Hidden Truth Behind Property Investment!
Uploaded: 2023-09-04T16:56:09+00:00
Duration: 54 s
Channel: Jason Hartman
Description: In this monologue, the speaker challenges the common claim that housing prices, when adjusted for inflation, have not risen because inflation outpaces…

4 Sept 2023 · 1 min

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In this monologue, the speaker challenges the common claim that housing prices, when adjusted for inflation, have not risen because inflation outpaces price appreciation. He argues that this view ignores the impact of leverage. Using a scenario where an investor purchases a property with only 10% equity, he demonstrates that the effective return on equity is magnified tenfold, turning a modest 3.9% price appreciation into a 39% return. Even if inflation is 5%, the leveraged return still yields a net gain of 34%. The speaker refutes the notion that investors lose money under these conditions, emphasizing that leverage fundamentally changes the profitability calculation.

Chapters

Here's the argument. In inflation adjusted terms, these housing prices did not go up if inflation is higher than the appreciation rate. The most important thing many times is what they don't tell you. If someone bought any of these properties and they have 10% equity in the property, these leverage returns are dramatically higher. You basically multiply them all by 10. If inflation is really bad, and inflation is, say 5%, for example, and say Fannie Mae's forecast is correct and house prices appreciate by 3.9%, well, you really lost money. But this argument is completely false because people leverage the properties. So, for example, if they had 10% equity in the property at the time, they would have a 39% appreciation rate, effectively. So if inflation was 5%, then they're still ahead by 34%. And that's why the argument doesn't hold water.