Undoubtedly, many Americans today are concerned with inflation. The rising cost of living is making it difficult to make ends meet, let alone save and invest for the future. As the stock market takes a hit, many are wondering where their money could get a better measure of stability as inflation rages and a recession may loom.
Real estate has historically proven to be a stable investment during inflation. Whether it’s a single-family home, an apartment building, or even commercial property, many investors are paying more attention to the asset class for its stability and tax benefits, while stock markets look bleak for the foreseeable future.
Jacky He, CEO of real estate investment firm DMG Investments, explains when it comes to investing in real estate amidst inflation: “In the environment of rising interest rates that we are in right now, people are expected to look to the Deciding to rent instead of deciding to buy a home. This offers investors in apartment buildings a constant supply of tenants.”
The constant demand for apartments and real estate will probably always exist. As Mark Twain famously quipped, “Buy land, they won’t make it anymore.” But assessing whether real estate might be a good fit for your portfolio is more complex than that. There are also liquidity needs, tax strategy and also the time to consider. that can be spent managing a real estate investment, which tends to be more intense than a stock portfolio. Nonetheless, when prices are rising, real estate can often be a cheap place to have your money.
Of course, every investment always involves risks. But if you do your homework and choose wisely, investing in multifamily real estate can be a smart move during times of inflation.
Why is investing in multifamily real estate a good choice in times of inflation?
There is always a demand for rental properties
People will always need a place to live. This means that regardless of economic conditions, there will always be demand for rental properties. This has been proven to be true of Millennials and Gen Z, who are renting rather than owning for a number of reasons, including rising student debt costs and challenging job markets.
Selecting markets with high rental demand can contribute to a successful investment. “When we do a multi-family acquisition, we choose markets with strong fundamentals like low vacancy rates,” he explained.
Your work can add value to your investment
Another benefit of investing in real estate is that you can add value to your investment that appreciates the price. It can also result in an increase in the income your wealth generates. For example, you can renovate your property and then charge higher rents. This is a benefit enjoyed by property owners that isn’t replicated in the stock market or many other asset classes.
You have more control over your investment
Investing in real estate gives you more control over your investment than investing in other types of assets. For example, you have more choices about who can rent out your units. You can adjust the rent. And if you ever need to sell your investment, you can do so without any restrictions.
Multifamily properties usually value along with CPI
When you think of multifamily housing as the category of real estate you want to enter, there are many unique advantages to this category. A particular advantage is the correlation of rental prices with inflation. Buying multi-family properties is a great way to hedge against inflation as it usually appreciates in value along with the CPI. As rental income increases, so does the value of your property.
Real estate also has tax benefits
Another benefit of investing in multi-family real estate is the tax breaks that are granted to owners. Rental property owners are allowed to write off the value of their property against their taxes, which helps offset taxes owed on a portion of their rental income. There are also other ways to save on taxes when selling your property, such as: B. through a 1031 exchange, which allows you to have the proceeds of your sale flow into a similar property without paying capital gains taxes.
While real estate investing offers many benefits, which can be particularly amplified during times of inflation, it’s important to understand your goals and risk tolerance, and to develop a strategy that fits your particular situation.
