How Mortgage Values Decline With Inflation

How Mortgage Values Decline With Inflation

As inflation rises, mortgage values actually decline. Income property investors can take advantage of this phenomenon with the right strategies. Keep reading to learn how.

Two Parts of Mortgage

Jason Hartman believes there is more than one part of a mortgage which plays a part in its value. There are two parts to a mortgage:

  1. The monthly payment for the mortgage.
  2. The balance of the mortgage.

With inflation, both of these mortgage elements are going to devalue, and this will be beneficial for investors. How well it plays out for you as an income property investor depends on how much you invest in, where you buy, and how well you diversify. There are several elements involved, but with Jason Hartman's income property investment strategies, you'll be off to a good start.

Diversify in the Right Markets

To get the most out of upcoming inflation, it's important to invest in as much income property as possible. This will create a positive equation. However, if you own a lot of the wrong type of income property in the wrong markets, the equation won't work quite as well. In general, the ratio is bad in expensive markets because you can't buy as much. So, for the best results, diversify income property investments in affordable, profitable markets.

The LTI Ratio


LTI Ratio, or the Land to Improvement Ratio, essentially compares the value of land to the value of improvement. For instance, every bubble market which has declined recently shows a high land value. Any market experiencing a bubble “pop” is just the opposite. The monetary worth of land is quite high in certain markets. However, in other markets, the land value is actually declining.

The Housing Shortage

Though there's been massive demand for housing,

construction hasn't been able to keep up with it. Jason Hartman says if you can't repeat the same construction, than nobody builds it. When no one builds it and the population continues to increase, we end up with a housing shortage. This can be very beneficial to income property investors following Jason's strategies.

The fact is, construction has never really kept up with the demand. To combat this, they do a number of things. Some people live on smaller lots, others live in condos, and many acquire roommates. The average American residential property has become larger in terms of square footage, but the land around it has gotten smaller.

Both population and inflation are only going to increase, and investors can use this to their advantage. With Jason Hartman's investment strategies, you can be one of them. The keys are to diversify your income properties and stay educated about the most effective ways to profit with real estate. (Top image: Flickr | 401(K) 2012)

The Young Wealth Team