Inflation is Good, Right?

“No millionaire is paying down their debt.” – Robert Kiyosaki

Those individuals who are trying to build wealth and create financial freedom and security for their future, aren’t necessarily paying down their investment property debt to grow their wealth.

There are three mechanisms that are doing this for them:

1. Inflation.

Inflation is eroding the value of your loan.

How?

Inflation is currently around 7% and working hard to devalue the power of our dollar.

Back in 1975 the average loan was $17,800. Over the years inflation has turned that loan from a significant amount of money for a family to burden, into barely enough money to purchase a decent second hand car. Inflation is constantly working towards eroding your debt.

2. Your loan repayments are outsourced to a tenant.

When an investor purchases an investment property, they are providing housing for a tenant who is effectively paying down the debt for the investor. We need property investors, without them there would be no properties available to rent!

3. Exponential capital growth.

This is usually the primary reason property investors purchase an investment property. They relentlessly grow in value when examined over longer time periods.

Back in 1975 the average house price in Australia was around $20,000! This clearly shows how consistent the growth in property has been in Australia.

With so much focus on the cost of debt and rising interest rates, don’t get too bogged down in the short term negative factors and understand that there are other mechanisms, including high inflation, that are moving you towards your target of financial freedom.