In 1978, Donald Trump launched his real estate empire by buying the dilapidated Commodore Hotel in Manhattan. The Week reports that he funded it with a combination of $70 million in bank loans (cosigned by his father Fred Trump), a $1 million loan from his father, cash from the Hyatt Corporation and a 40-year tax abatement partnership with New York City in exchange for a share of future profits.

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It was a bold plan — and it worked. Trump reopened the hotel in 1980 as the Grand Hyatt, and later sold his remaining share for $140 million.

Trump certainly isn’t alone in his use of debt and leveraging other people’s money to build his own wealth. So how do billionaires use leverage differently than the middle class?

The middle class uses debt to buy furniture and cars and burritos with Klarna. The rich buy assets that generate cash flow.

“Billionaires use leverage to build wealth; the average person uses it to buy liabilities,” notes Josh Tolley, CEO of business brokerage Kingsbridge. “They use business credit, real estate loans or asset-backed lending to generate cash flow.”

For a simple example, imagine buying a rental property for $100,000. You borrow $80,000, make a down payment of $20,000, and put up $4,000 in closing costs. The property generates $200 in average cash flow each month. You invested $24,000 of your own cash, and in exchange you earn $2,400 in the first year (a cash-on-cash return of 10%).

That $80,000 loan helped you start earning cash flow. It didn’t go toward filling out your wardrobe.

Debt can help you earn higher returns on your cash. In the example of a rental property, the rent might rise by 5% each year — all while your mortgage payment remains the same. Over time, that earns you disproportionately higher cash flow compared to your own investment.

For example, after two years the rental property now generates $3,600 in annual cash flow. That comes to a cash-on-cash return of 15%, which means your cash flow jumped by 50% even though the rent just rose by 5-10%.

That’s leverage.

Inflation doesn’t hurt real asset owners. If anything, it helps them.

Remember, the monthly loan payment on that rental property is fixed. But the hotter inflation runs, the more the owner can raise rents, creating an ever-wider cash flow spread.

Inflation also drives up the value of real assets alongside the cash flow. Real estate agent and investor Eli Pasternak of Liberty House Buying Group explains further: “The key is using fixed rate debt on appreciating assets, because inflation makes your loan payments cheaper over time while property values increase.”