3 Best Real Estate Investing Techniques During High Inflation
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Loading... - Agnes Janos
- 29 Jul 2022
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Since 1967 real estate inflation has increased at 4.19% on an annualized basis. During that same time, inflation rose at a 4% average annualized basis. The small 0.19% difference may not seem like much, but it does mean real estate has been a notable hedge against inflation when held for the long haul.
Inflation and real estate inflation often move independently of each other, meaning some years home values may rise much faster than inflation or visa versa. In the end however, real estate has come out ahead. So in today's high inflationary times, real estate can prove to be a possible avenue for combating inflation. But certain types of real estate investments can offer better hedges than others.
If you want to make the most out of your investment efforts and dollars while inflation soars, here are the three of the best real estate investing techniques to use today.
1. Buy a rental property
Outside of a few types of real estate, most leases are contracted for periods of anywhere from five to 30 years, with contractual rent increases built in. These rate hikes do help account for normal inflationary periods, but when levels near double digits like right now, long term contractual rate hikes may not be enough. That's why short-term leases are king during inflationary periods because landlords can quickly increase the rent on them to compensate for the higher costs of owning and operating their properties.
This can help the property owner continue to generate a positive cash flow despite higher costs to own and manage the rental.
It also helps that residential property plays an essential role in our economy. Unique market factors like job opportunities, housing supply, and affordability, among others, ultimately drive the supply and demand for a market. Meaning some markets may see more long term housing demand than others. But generally speaking, people will always need a place to live. Choosing your rental investment market wisely could help you ride through the ups and downs of challenging economic periods where demand may be lower. There are also a host of other benefits in owning a rental property like tax deductions, deprecation, and income potential. Read More...
