Inflation has seemed to be the number one topic in everyone’s mind for the past year, with rising costs of goods and services and declines in the purchasing power of money being noticeable. Inflation is in full swing. With the latest CPI being reported last week, inflation has soared to 8.6% breaking records not for the good.
Inflation is definitely a topic of conversation, even among investors like myself. Will it have an impact on your real estate holdings? Will it have a negative or positive impact on your business? Inflation is clearly a huge concern for everyone.
In my opinion, investors in real estate should not be concerned about growing inflation. Investors, will be the ones who benefit from it. People who aren’t likely to benefit are those who are, unfortunately, on the bottom end of the economic spectrum: those who don’t have their money in the game, who are in debt, or who have little equity in their primary home.
Unlike bonds and cash, which lose purchasing power when prices for goods and services rise, commercial real estate is a relatively safe inflation hedge. It has intrinsic worth, is restricted in availability, and pays a return. Multifamily investments are one of the strongest inflation hedges in commercial real estate, since the lease structures are considerably better positioned to gain from an inflation increase than other asset types.
It’s important to keep in mind that multifamily real estate is a necessity. The fundamental goal is to provide a safe haven. Moving is expensive and time-consuming, and with few options in the home-buying market, renting is becoming more popular. Due to the lowest availability of for-sale property in years, home prices have soared in the last 18 months, putting greater pressure on pricing and making affordability a concern for many customers. The demand for rental apartments in multifamily homes has surged as home ownership has become relatively more expensive.
To learn more about how we hedge against inflation and protect our investors capital, reach out to us and schedule a call!
