BiggerPockets Real Estate Podcast: “The One True ‘Inflation-Proof’ Investment (EVEN with Tariffs)” – Detailed Summary

Host: Dave Meyer, Head of Real Estate at BiggerPockets
Release Date: April 9, 2025
Episode Title: The One True “Inflation-Proof” Investment (EVEN with Tariffs)

1. Introduction: The Imperative to Combat Inflation

Dave Meyer opens the episode by emphasizing the critical need to protect personal wealth from inflation. He warns that inflation erodes net worth by diminishing the value of every dollar earned. With recent data indicating a rise in inflation and the implementation of new tariffs, Meyer underscores the urgency for investors to adapt their strategies to this evolving economic landscape.

Dave Meyer [00:00]: "You need to protect your wealth from inflation because inflation eats into your net worth and makes every dollar you earn worth less."

He promises to share effective investment strategies to not only withstand inflation but also thrive in any inflationary environment, whether it’s high, low, or flat.

2. Understanding Inflation: Definitions and Causes

Meyer breaks down the concept of inflation, describing it as the devaluation of the dollar, meaning money buys less over time. He categorizes the causes of inflation into two main buckets:

• Monetary Supply Increase: Often referred to as money printing, where an increase in the monetary supply leads to each dollar being worth less.

• Supply Shocks: Situations where the supply of goods or services diminishes, causing prices to rise. Examples include:

  • Goods: Avian flu causing a shortage of eggs, leading to higher prices.
  • Services: Limited availability of professionals like doctors and lawyers raises their fees.
  • Labor: COVID-19 led to a shortage of restaurant workers, increasing wages for servers and frontline employees.

Dave Meyer [05:30]: "The first is the printing of money... The second bucket is supply shocks... when there is not enough of a thing that people want, prices go up."

3. The Dual Nature of Inflation: When It’s Beneficial

Contrary to popular belief, Meyer explains that some level of inflation is beneficial as it stimulates the economy. He points out that moderate inflation encourages spending and investment rather than hoarding money, which can prevent recessions.

Dave Meyer [07:15]: "Some inflation is actually seen as a good thing among almost all economists because it stimulates the economy."

Meyer cites the Federal Reserve’s target inflation rate of around 2%, acknowledging that recent years saw a spike to 9% due to increased monetary supply and supply shocks, though inflation has since moderated to approximately 3%.

4. Real Estate as an Inflation Hedge

Meyer delves into the heart of the episode: evaluating real estate’s effectiveness in hedging against inflation.

a. Historical Performance of Real Estate

He reviews 60 years of data, noting that home prices have grown on average by 4.62% annually, while inflation has hovered around 3.7%. This results in an unleveraged real estate return of approximately 1%.

Dave Meyer [12:00]: "Over the last 60 years of data, home prices on average grew 4.62% each year while inflation was at an annual pace of about 3.7%."

b. Leveraged Real Estate Investments

Meyer illustrates the power of leverage using a hypothetical example:

• Initial Purchase: $250,000 property with a 20% down payment ($50,000).
• Nominal Growth: Property value projected to reach $970,000 in 30 years.
• Inflation-Adjusted Growth: Adjusted to $337,000 in today’s dollars, yielding a real return of 6.6% on the initial investment.

Dave Meyer [13:45]: "If you use that inflation-adjusted 1% growth rate, that property would be worth about 337 grand in today's dollars. And that would yield you, on the $50,000 you invested, a 6.6% real return."

Additionally, rental income plays a crucial role. Assuming rents increase at the pace of inflation, fixed-rate mortgage payments become less burdensome over time, enhancing cash flow.

Dave Meyer [16:30]: "Your debt service, the amount you are paying in principal and interest, does not change. So as long as your rents are keeping pace with inflation, your cash flow should be growing."

c. Rules of Thumb for Real Estate Investment

Meyer outlines three fundamental strategies for using real estate to hedge against inflation:

1. Buy and Hold: Long-term ownership ensures that the investment keeps pace with or outpaces inflation.

2. Invest in Appreciating Markets: Focus on markets with historical growth rates exceeding inflation, ensuring property values appreciate over time.

3. Use Fixed-Rate Debt: Locking in mortgage rates ensures that debt payments remain constant, effectively reducing in real terms as inflation rises.

Dave Meyer [20:05]: "First and foremost, buy and hold... Second, make sure that the markets that you invest in have a good opportunity to appreciate. Third, use fixed rate debt."

5. Comparing Asset Classes: Which Outperforms Inflation?

Meyer transitions to a comparative analysis of various asset classes to determine their effectiveness in hedging against inflation.

a. Cash and High-Yield Savings Accounts

Holding cash typically results in a loss against inflation. However, Meyer highlights that high-yield savings accounts and money market accounts can offer positive real returns.

Dave Meyer [25:20]: "If you go to other banks, like Barclays or American Express or Ally Bank, there's all these other banks that are offering 4, 4 and a half percent... that's about a 1% real return."

He contrasts this with traditional banks offering low interest rates, which lead to negative real returns when inflation is high.

Dave Meyer [28:40]: "If you have your money in Chase or Bank of America or Wells Fargo that aren't paying four and four and a half percent, you are losing money right now."

b. Bonds

Bonds, particularly U.S. Treasuries, offer modest real returns. Meyer explains that while they are a safe investment, their ability to outpace inflation is limited.

Dave Meyer [30:15]: "If you subtract the inflation rate, you're getting about a one and a half percent real return. That's pretty good."

However, long-term real returns from bonds remain around 1%, making them less attractive for those seeking significant growth.

c. Stock Market (Equities)

Equities provide a robust hedge against inflation, with historical real returns averaging between 5% to 7%.

Dave Meyer [33:50]: "The average real return... is about 6.4%. So overall, equities are a really good inflation hedge and they actually beat inflation by quite a lot."

He notes that while equities offer higher returns, they come with increased volatility compared to real estate.

d. Gold

Contrary to popular belief, Meyer argues that gold is not as effective an inflation hedge as commonly thought. He references an analysis by the CFA Institute showing gold’s real price is highly volatile and not consistently outperforming inflation.

Dave Meyer [38:15]: "Gold is really volatile like the stock market... it's actually pretty similar to where it was in the early 1980s... gold is actually not as good an inflation hedge as most people think."

6. Dave’s Comprehensive Analysis and Conclusion

Summarizing his analysis, Meyer concludes that while cash, bonds, and equities each offer varying degrees of inflation protection, real estate stands out as the most effective tool for both hedging against and outpacing inflation.

Dave Meyer [40:30]: "If you want to outperform inflation and see your net worth grow, see your spending power grow on top of inflation, you have two choices. You can either go into the equities market or you could buy real estate."

He emphasizes that real estate not only provides comparable real returns to the stock market but also offers additional benefits such as rental income, tax advantages, and lower volatility.

Dave Meyer [42:10]: "Real estate offers a lot of those secondary benefits. If you buy a rental property, you get all those rent benefits... you also get a lot of tax benefits, so you get to keep more of those real returns."

7. Personal Investment Strategy and Final Thoughts

Meyer shares his personal investment strategy, which balances equities and real estate to optimize returns and manage risk.

Dave Meyer [45:00]: "I put some money in the stock market, but mostly invest in long term real estate assets because I think that's the best way to hedge against inflation and grow my net worth and spending power over the long run."

He encourages listeners to consider real estate as a core component of their investment portfolios to effectively combat inflation and secure financial growth.

Dave Meyer [45:30]: "That's my take. That's how I invest... I think buying rental property, buy and hold rental property real estate is the best way to do that."

Meyer invites listeners to share their thoughts and engage with the BiggerPockets community through various platforms.

Key Takeaways:

• Inflation erodes wealth: It’s essential to invest in assets that grow faster than inflation to preserve and increase net worth.

• Real Estate as a Superior Hedge: Leveraged real estate, especially rental properties with fixed-rate mortgages, provides substantial real returns and benefits beyond mere property appreciation.

• Comparative Asset Analysis: While equities offer strong real returns, real estate provides additional stability and benefits. Bonds and cash, particularly in low-yield accounts, offer limited protection against inflation.

• Strategic Investing: Adopting a buy-and-hold strategy in appreciating markets using fixed-rate debt optimizes real estate’s ability to outpace inflation.

Notable Quotes:

• Understanding Inflation:

  Dave Meyer [05:30]: "What we have to keep in mind is that your net worth in the future will be less because of inflation."

• Real Estate Returns:

  Dave Meyer [13:45]: "That would yield you, on the $50,000 you invested, a 6.6% real return."

• Investment Strategy:

  Dave Meyer [42:10]: "If you buy a rental property, you get all those rent benefits... you also get a lot of tax benefits."

• Final Takeaway:

  Dave Meyer [45:30]: "Buying rental property, buy and hold rental property real estate is the best way to do that."

Conclusion

In this episode, Dave Meyer provides an insightful analysis of various investment assets in the context of rising inflation and tariffs. He makes a compelling case for leveraged real estate as the most effective strategy for both hedging against and outperforming inflation. By highlighting the historical performance, strategic advantages, and practical guidelines for real estate investing, Meyer equips BiggerPockets listeners with the knowledge to make informed investment decisions aimed at securing financial freedom.

For more detailed discussions and strategies on real estate investing, subscribe to the BiggerPockets Real Estate Podcast on YouTube, Apple, Spotify, or your preferred podcast platform. Join Dave Meyer every Monday, Wednesday, and Friday for actionable insights and expert advice.