The Inflation/Deflation Debate and What it Means for Real Estate Investors

Getting a handle on prior economic circumstances is hard enough, but predicting future conditions is virtually impossible.  There are too many unknown and dynamic variables that go into a market economy, not to mention any unforeseeable circumstances.  Putting too much weight on the forecasts of “experts” can be hazardous.  That’s why, in making financial decisions, I feel it’s much more important to think in terms of probabilities and minding downside risk than it is to think in absolutes.

One of the economic debates that carries great weight for real estate investors is the inflation or deflation question.  Its answer has significant consequences for the direction of interest rates and related real estate values.  Unfortunately, its answer is fleeting, with much of its outcome and consequence lying somewhere in the wrestling match between markets and the world’s central banks.

I’m no apologist for the Federal Reserve’s (Fed) past actions and the unintended consequences it has produced, but we play with the cards we are dealt so we might as well understand them.  The financial and monetary structure of the world, especially since the 1970’s, is dependent on credit expansion.  Right or wrong, the popular economic philosophy in recent history has gravitated towards demand-pull spending solutions in order to mitigate any economic downturns.  The Fed and other governmental entities have attempted to generate activity today in hopes of spurring continued growth.  Remember Cash for Clunkers?  That’s just one of the programs implemented, along with the various iterations of Quantitative Easing and related interest rate policies enacted to have the desired effect. 

Unfortunately, artificially low interest rates and easy credit lead to a misallocation of capital throughout the economy.  Rates are really a reflection of how much one values a dollar today versus in the future.  Because interest rates represent a time preference, low rates pull economic activity forward, leaving a gap to deal with in the future.   Rates should act as a financial discipline on economic decision making.  Using too low of a hurdle can make poor economic decisions appear correct.  The consequences are a perpetual cycle of credit expansion leaving us a certain fragility in the underlying financial structure we have today.  The financial news media in recent years has had to report on concepts like taper tantrums, repo market crashes and inverted yield curves, just a few of those fragility symptoms.

What remains is a situation where deflation would have dire consequences and the Fed and other central banks know this and have pledged to fight that condition by any means necessary.  As long as they maintain control over the market, we can expect more of the same.  The question becomes “when do they lose control and what are the consequences?”  The answer may rest in the inflation/deflation question.

Fortunately, for their policy prescriptions, we’ve been in a nearly 40-year fixed-income bull market with continually declining interest rates.  There have been many deflationary factors over this time.  Conditions like aging demographics, technological progress, globalization, and an increasing debt overhang with its related declining money velocity have provided deflationary pressure.  Many think this will continue, hence the numerous forecasts of continued low interest rates.  The problem comes if the script flips and inflationary pressures take over.

The Fed and other central banks may have painted, or printed, themselves into a corner.  They have been undermined in any previous attempt to normalize rates given the large debt overhang they perpetuated.  The economy simply cannot handle a large increase in rates, which is why a move to any significant inflationary condition could be dangerous given their lack of ability to fight it.  This would likely spook the markets and they would wrestle control of rates away from the central banks, with potentially devastating economic results.

What could lead to these pressures?  Look no further than the unheard of levels of money and credit creation.  Many thought inflation would result from some of the same prescriptions coming out of the 2008 crisis.  We have not seen significant consumer price inflation the last decade, at least if you believe official measures.  What did result was asset price inflation as this is where the created money was first deployed.  That solution was more about recapitalizing an over-levered banking system and many of those funds never left the system with enough bank credit creation and money velocity to stoke consumer price inflation.  Instead, it became an underpinning of asset price inflation.

This time, however, and because of some of the inequality resulting from last time’s attempted solution, we could expect to see more funds going directly to the populace, as in the current stimulus checks and more calls for Universal Basic Income.  If related money velocity follows, we could experience significant upticks in consumer price inflation.  The continued melding of the purse strings and the financing of government is no longer a hidden phenomenon.  The illusion of independence between the Fed and Treasury has been thrown out the window as the Fed stands by to create the money and finance whatever it is the government finds politically popular.  Nothing symbolizes this more than former Fed Chair, Janet Yellen, now as Treasury Secretary.

We are already in a situation where there is no mathematically viable way to pay our existing debt and future entitlement obligations with the present purchasing power of the currency.  The existing political climate shows no inkling of moderating these spend and borrow habits.  Increasing taxes, reducing government spending, or outright default are not viable options.  The only politically feasible solution is to continue the attempt to inflate them away, hoping it doesn’t evolve into an unmanageable currency devaluation or debt-deleveraging depression.  Remember, when the Fed says they are targeting 2% inflation, they are really saying they are cutting the purchasing power of your currency by roughly half over the course of a generation, or to the benefit of real estate investors, the value of the debt owed.

So, what does this all mean for today’s investment environment?  There is no question that financial assets are at elevated levels as the central banks have propagated a disconnect between asset prices and underlying economic fundamentals.  We often see bad economic reports met with increases in equity market levels as those markets cheer the hopes of further stimulus and artificial support in lieu of organic economic growth.  We now have $17 trillion of negative yielding debt across the globe.  Step back and think about what that says about the financial structure when one must pay another to loan them money.  What used to be risk-free return on government debt has been turned into return-free risk.

Retirees and the traditional 60/40 stock and bond portfolio have been sacrificed in the name of propping up the current environment.  For the past 40 years, this portfolio has performed well as bonds have been in a long bull market.  They’ve provided extra juice in times when the two asset classes were moving in tandem, and diversified support when they were diverging.  We can hardly expect the same returns going forward.  With interest rates at minimal level, the math needed to achieve the 7-plus percent real (inflation-adjusted) rate of return many pension plans need to remain solvent just doesn’t compute.  Further, the level of equities is very much a function of those low rates, as the lack of return on low-risk assets has pushed investors into other risk assets, bidding up their prices beyond normal levels.

With financial assets at elevated levels, tangible assets become a very important part of a well-rounded portfolio with a chance to minimize the impact of this financialization.  The closer we can get to the ultimate price level reflecting underlying economic fundamentals, the better off we are.  It provides a measure of safety in lieu of the complete dependence on the attitude of future buyers in providing a return (aka: Greater Fool Theory).  Real estate provides a very important role here, but one must stay cognizant of the risks.  While the risk of an outright debt-deleveraging depression is still relatively small, it has certainly increased, making high-leverage recourse debt all the more dangerous.  Remember to mind your downside risk.

That said, investing in a product providing a critical human need, such as shelter, helps provide a level of safety. It is a necessity that will never disappear. It may just fluctuate in value along the inflationary/deflationary spectrum.  It is that spectrum which the central banks attempt to manage, further complicated by the political environment.  The most politically feasible way of giving the voters what they want and still dealing with its cost, is to borrow and subsequently inflate it away.  Why not hitch your wagon to that force?  Buying a cash flowing basket of tangible commodities, like an apartment building, with a moderate amount of long-term, fixed-rate, non-recourse debt is a fantastic solution.  Allow inflation to increase net operating income and related underlying asset value, while at the same time, inflate away the value of the debt used to purchase the asset.  As long as you have the right financing and staying power to weather the inevitable economic storms, the Fed’s policy prescriptions will provide the tailwinds for wealth creation. 


Tom Borger is a real estate investor and developer in Northern Indiana.

Nothing on this website should be considered financial advice. Investing involves risks which you assume. It is your duty to do your own due diligence. Read all documents and agreements before signing or investing in anything. It is your duty to consult with your own legal, financial and tax advisors regarding any investment.

Chris Franckhauser

Vice President of Strategy & Growth, Advisory Partner

Chris Franckhauser, Vice President of Strategy & Growth, Advisory Partner for Left Field Investors, has been involved in real estate since 2008. He started with one single-family fix and flip, and he was hooked. He then scaled, completing five more over a brief period. While he enjoyed the journey and the financial tailwinds that came with each completed project, being an active investor with a W2 at the time, became too much to manage with a young and growing family. Seeing this was not easily scalable or sustainable long term, he searched for alternative ideas on where to invest. He explored other passive income streams but kept coming back to his two passions; real estate and time with his family. He discovered syndications after reconnecting with a former colleague and LFI Founder. He joined Left Field Investors in 2023 and has quickly immersed himself into the community and as a key member of our team.  

Chris earned a B.S. from The Ohio State University. After years in healthcare technology and medical devices, from startups to Fortune 15 companies, Chris shifted his efforts to consulting and owning a small apparel business when he is not working with LFI (Left Field Investors) or on his personal passive investments. A few years ago, Chris and his family left the cold life in Ohio for lake life in the Carolinas. Chris lives in Tega Cay, South Carolina with his wife and two kids. In his free time, he enjoys exploring all the things the Carolinas offer, from the beaches to the mountains and everywhere in between, volunteering at the school, coaching his kids’ sports teams and cheering on the Buckeyes from afar.  

Chris knows investing is a team sport. Being a strategic thinker and analytical by nature, the ability to collaborate with like-minded individuals in the Left Field Community and other communities is invaluable.  

Jim Pfeifer

President, Chief Executive Officer, Founder

Jim Pfeifer is one of the founders of Left Field Investors and the host of the Passive Investing from Left Field podcast. Left Field Investors is a group dedicated to educating and assisting like-minded investors negotiate the nuances of the passive investing landscape and world of syndications. Jim is a former financial advisor who became frustrated with the one-path-fits-all approach of the standard financial services industry. Jim now concentrates on investing in real assets that produce cash flow and is committed to sharing his knowledge with others who are interested in learning a different way to grow wealth.

Jim not only advises and helps people get started in passive real estate syndications, he also invests alongside them in small groups to allow for diversification among multiple investments and syndication sponsors. Jim believes the most important factor in a successful syndication is finding a sponsor that he knows, likes and trusts.

He has invested in over 100 passive syndications including apartments, mobile homes, self-storage, private lending and notes, ATM’s, commercial and industrial triple net leases, assisted living facilities and international coffee farms and cacao producers. Jim is constantly looking for new investment ideas that match his philosophy of real assets producing cash flow as well as looking for new sponsors with whom he can build quality, long-term relationships. Jim earned a degree in Finance & Marketing from the University of Oregon and a Master’s in Business Education from The Ohio State University. He has worked as a reinsurance underwriter, high school finance teacher, financial advisor and now works exclusively as a full-time passive investor. Jim lives in Dublin, Ohio with his wife, three kids and two dogs. In his free time, he loves to ski, play Ultimate frisbee and cheer on the Buckeyes.

Jim earned a degree in Finance & Marketing from the University of Oregon and a Master’s in Business Education from The Ohio State University. He has worked as a reinsurance underwriter, high school finance teacher, financial advisor and now works exclusively as a full-time passive investor. Jim lives in Dublin, Ohio with his wife, three kids and two dogs. In his free time, he loves to ski, play Ultimate frisbee and cheer on the Buckeyes.

Chad Ackerman

Chief Operating Officer, Founder

Chad is the Founder & Chief Operating Officer of Left Field Investors and the host of the LFI Spotlight podcast. Chad was in banking most of his career with a focus on data analytics, but in March of 2023 he left his W2 to become LFI’s second full time employee.

Chad always had a passion for real estate, so his analytics skills translated well into the deal analyzer side of the business. Through his training, education and networking Chad was able to align his passive investing to compliment his involvement with LFI while allowing him to grow his wealth and take steps towards financial freedom. He has appreciated the help he’s received from others along his journey which is why he is excited to host the LFI Spotlight podcast and share the experience of other investors and industry experts to assist those that are looking for education for their own journey.

Chad has a Bachelor’s Degree in Business with a Minor in Real Estate from the University of Cincinnati. He is working to educate his two teenagers in the passive investing world. In his spare time he likes to golf, kayak, and check out the local brewery scene.

Ryan Steig

Chief Financial Officer, Founder

Ryan Stieg started down the path of passive investing like many of us did, after he picked up a little purple book called Rich Dad, Poor Dad. The problem was that he did that in college and didn’t take action to start investing passively until many years later when that itch to invest passively crept back up.

Ryan became an accidental landlord after moving from Phoenix back to Montana in 2007, a rental he kept until 2016 when he started investing more intentionally. Since 2016, Ryan has focused (or should we say lack thereof) on all different kinds of investing, always returning to real estate and business as his mainstay. Ryan has a small portfolio of one-to-three-unit rentals across four different markets in the US. He has also invested in over fifty real estate syndication investments individually or with an investment group or tribe. Working to diversify in multiple asset classes, Ryan invests in multi-family, note funds, NNN industrial, retail, office, self-storage, online businesses, start-ups, and several other asset classes that further cement his self-diagnosis of “shiny object syndrome”.

However, with all of those reaches over the years, Ryan still believes in the long-term success and tenets of passive, cash-flow-focused investing with proven syndicators and shared knowledge in investing.

When he’s not working with LFI or on his personal passive investments, he recently opened a new Club Pilates franchise studio after an insurance career. Outside of that, he can be found with his wife watching whatever sport one of their two boys is involved in during that particular season.

Steve Suh

Chief Content Officer, Founder

Steve Suh, one of the founders of Left Field Investors and its Chief Content Officer, has been involved with real estate and alternative assets since 2005. Like many, he saw his net worth plummet during the two major stock market crashes in the early 2000s. Since then, he vowed to find other ways to invest his money. Reading Rich Dad, Poor Dad gave Steve the impetus to learn about real estate investing. He first became a landlord after purchasing his office condo. He then invested passively as a limited partner in oil and gas drilling syndications but quickly learned the importance of scrutinizing sponsors when he stopped getting returns after only a few months. Steve came back to real estate by buying a few small residential rentals. Seeing that this was not easily scalable, he searched for alternative ideas. After listening to hundreds of podcasts and attending numerous real estate investing meetings, he determined that passively investing in real estate syndications was the best avenue to get great, risk-adjusted returns. He has invested in dozens of syndications involving apartment buildings, self-storage facilities, resort properties, ATMs, Bitcoin mining funds, car washes, a coffee farm, and even a Broadway show.

When Steve is not vetting commercial real estate syndications in the evenings, he is stomping out eye diseases and improving vision during the day as an ophthalmologist. He enjoys playing in his tennis and pickleball leagues and rooting for his Buckeyes and Steelers football teams. In the past several years, he took up running and has completed three full marathons, including the New York City Marathon. He is always on a quest to find great pizza, BBQ brisket, and bourbon. He enjoys traveling with his wife and their three adult kids. They usually go on a medical mission trip once a year to southern Mexico to provide eye surgeries and glasses to the residents. Steve has enjoyed being a part of Left Field Investors to help others learn about the merits of passive, real asset investments.

Sean Donnelly

Chief Culture Officer, Founder

Sean holds a W2 job in the finance sector and began his real estate investing journey shortly after earning his MBA. Unfortunately, it could not have begun at a worse time … anyone remember 2007 … but even the recession provided worthy lessons. Sean stayed in the game continuing to find his place, progressing from flipping to owning single and multi-family rentals to now funding opportunities through syndications. While Sean is still heavily invested in the equities market and holds a small portfolio of rentals, he strongly believes passive investing is the best way to offset the cyclical nature of traditional investment vehicles as well as avoid the headaches of direct property ownership. Through consistent cash flow, long term yield and available tax benefits, the diversification offered with passive investing brings a welcomed balance to an otherwise turbulent investing scheme. What Sean likes most about the syndication space is that the investment opportunities are not “one size fits all” and the community of investors genuinely want to help.

He earned a B.S. in Finance from Iowa State University in 1995 and a MBA from Otterbein University in 2007. Sean has lived in eight states but has called Ohio home for the last 20+.  When not attending his children’s various school/sporting events, Sean can be found running, golfing, shooting or fly-fishing.

Patrick Wills

Chief Information Officer, Advisory Partner

An active real estate investor since 2017, Patrick Wills’ investing journey began like many others – after reading the “purple book” by Robert Kiyosaki. Patrick started with single family rentals, and while they performed well, he quickly realized their inability to scale efficiently while remaining passive. He discovered syndications via podcasts and local meetups and never looked back. He joined Left Field Investors in 2022 as a member and has quickly become an integral part of the team as Vice President of Technology.

An I.T. Systems Engineer by trade, he experienced the limitations of traditional Wall Street investing firsthand in his career and knew there had to be a better way to truly have financial freedom.

Unfortunately, that better way is inaccessible to those who need it most. His mission is to make alternative investments accessible to everyone who seeks to take control of their financial future and to pursue their passions in life.

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