How to Use Real Estate to Hedge Against Inflation

The federal government has committed roughly $13 trillion ($13,000,000,000,000) on pandemic-related spending since early 2020.

A (Quick) Overview of Inflation

Around 30 years ago, in 1991, one dollar was worth more than twice today’s dollar. Play around with the BLS inflation calculator to get a sense of the power of inflation for yourself.

When people are willing to pay more money for goods and services, their cost increases, the more money is available in the economy, the more people are willing to spend, driving up costs and reducing the value of a single dollar.

Real Estate as a Hedge Against Inflation

Real estate values and rents not only tend to keep pace with inflation but drive inflation itself. As a result, they often rise faster than the official CPI inflation index.

Rental Properties’ Protection from Inflation

Every year, the dollar loses a little value. And every year, landlords raise rents (or at least they should) to keep pace with or surpass inflation.

Land

As with rental properties, land has intrinsic value. We need it for farming, building homes on, building commercial properties on, or simply for recreation such as fishing and hiking.

Real Estate Crowdfunding Investments

Private REITs, a form of real estate crowdfunding investment, are far less regulated, making them more flexible. Some pay high dividends; others reinvest much of their revenue into new properties.

Property-Secured Loans

Lending money secured by real estate provides strong returns and a hedge against inflation.

Refinance Adjustable Long-Term Loans

Interest rates are meager in the wake of the coronavirus pandemic, with the Fed funds rate still near 0%. If you have an ARM or adjustable rental property loan, consider refinancing it to fixed interest.

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