Viva la inflation! Demonetization and real estate financing for owners

Today in the news: USA over 5% inflation! The great spectre of inflation is back. Inflation means “devaluation of money.” What, my money is worth less? A shock to everyone, but not to everyone. Home buyers with loans rejoice over inflation! Money is worth less = goods cost more money to make up for the devaluation. So 1) you get more rent, for the same loan amount and 2) while money devalues, your property remains worth the same. You can learn what that means here!

What is inflation?

Inflation and real estate financing in combination are an extremely interesting and important topic for money investors!

What is inflation?

Explained very simply: in 30 years, the money may only be worth half as much.

For 10,000 euros you get 10 tons of wood today, for example. In 30 years you will only get 5 tons of wood for 10,000. Because your money is only worth half as much.

It’s simple:

Conventional investment: savings book

If you have invested 10,000 euros, then in 30 years you will “still” have about 10,000 + X (interest / price increases). The basis is and has always been your invested money.

  • Today: 10.000 Euro
  • In 30 years (example): 10,000 euros + X (interest / price increases)

These include savings books, endowment insurance, Riester savings & Co.

Real estate as an investment: comparison

New starting situation, same development, in 30 years the money is only worth half as much. This time, however, you have invested in a property. While the “saver” has his 10,000 euros + X, you have invested in a property. On the one hand, you have benefited from the return (rent) for 30 years and now you can sell your property for 20,000 euros + X (appreciation).

  • Today: 10.000 Euro
  • In 30 years (example): 20,000 euros + X (increase in value)

Inflation, your best friend as an owner with loans

The property is now “worth twice as much money” (i.e. 20,000), but you are still paying off your original sum (i.e. 10,000 euros).

Another advantage for capital investors, also the amount of money of the rent payment increases. If your tenant pays 300 euros a month now, it will be 600 euros a month later.

Why inflation (as a borrower) is your best friend?

Your loan is going down due to inflation!

Survey: The safest form of investment in the face of inflation?

When it comes to inflation protection, real estate is at the forefront, as seen here. Whether for personal use or as an investment.

  • 75% – Owner-occupied property
  • 62% – Investment property
  • 32% – endowment insurance

Statistik: Welche Anlageformen gelten in einem Inflationsszenario als sicher? | Statista

More about buying real estate: Wealth Building

Minimize the risk of inflation with house and apartments or “ignore” it altogether plus accumulate wealth? With the classic savings book, you lose value in real terms, in the long term. Real estate protects against inflation. Read more on the subject here, on my new site for buyers,

News. US inflation above 5.3% again for a long time

US inflation has been rising above 5.3% for a long time, Germany is at 3.8% inflation as of today.