Today we are going to be discussing inflation and how that affects you, the real estate market an individual, a realtor or entity that invests in real estate.
Inflation is an economic reality that can rarely be avoided since prices will continue to increase (at different rates depending on what it is) and the value of money will continue to decrease (at different rates depending on the country). Annual rates of inflation fluctuate depending on local and international circumstances. If you look at the rates of annual inflation in the United States during different years and decades you will notice that it’s not consistent over the long-term, but it is always happening.
Many investments lose value due to inflation. If you have a stock portfolio and hypothetically your annual gain last year was 5% in reality because of inflation your purchasing power has decreased. You will have only gained 3.4% since in 2019 the annual inflation rate in the United States was 1.6%. If you purchased a home in 2018, due to inflation rate in 2019 the price of that home will have increased by at least 1.6% without an increase to your mortgage payments.
The property you own, or simply put, your investment keeps up with the rate of inflation. As prices of consumer goods go up so does do rent prices and general living expenses and property values.
One of the few things that is not affected by inflation is the fixed rate mortgage payment on your investment. As your own costs go up, so does the price of rent on your property, meaning your monthly rental income will increase as well, however, your cost of owning the property stays the same and so does your mortgage payments. You have increased cash flow, coverage against increased living expenses and the value of your investment increases due to inflation. You are guaranteed to profit over the long term whether you continue to rent out the property or if you decide to sell.
In conclusion, if you want your money to not lose it’s value, invest in real estate (www.aminvali.com) to give yourself a buffer against inflation.