Is Real Estate a Hedge Against Inflation?

Barbells; not just for muscles, but also for money ;)

Is Real Estate a hedge against Inflation?

Some investors, like Jim Rickards, advise a barbell investing strategy, which implies having a balanced portfolio that both hedges for and against inflation. In this regard and more, it’s important to know ask the millionaire dollar question; does inflation support or disrupt real estate investments?

The answer, according to David Wieland, real-estate multi-millionaire, founder of Realized, and council member on Forbes is that yes, inflation supports real estate. This is because:

Inflation makes home prices rise, (along with all kinds of asset classes, commodities, and day-to-day product prices also increasing), and so you increase the amount of equity you have in the home, rather than the debt you have to pay back to the bank. Equity is YOUR money, and can be made liquid through refinancing, and potentially financing a new deal. Truly exciting stuff if you’re someone who plans on building a real estate empire.

Homes that hit rock-bottom in the 2008 recession rose back up and then some a decade later. If you’re in the buy-and-hold game for life, know that you can outhold the nastiest of recessions.

Real estate provides a recurring income, so long as you got yourself into a cash-flow positive deal. Recurring income is recurring income, which provides stability regardless of the price of the dollar.

Multi-family properties renew their leases every year, which means that owners can adjust for inflation and increase rental prices every year.

And perhaps more simply put, it depends on the real estate investment.

If you’re investing in a piece of commercial real estate that will still be in business during a time of inflation, then you’re safe. For instance, if your area of focus is on Strip Malls that have coffee shops, gyms, liquor stores, and pharmacies, those are all examples of businesses that people use during a recession. This means that your cash flow is still safe, and you will still be making (if you had your numbers right going in the deal, and you’re actively managing your business to improve your bottom line of course) a profit, regardless of whether your property is appreciating or depreciating. If you buy a property like this in an area that is projected to grow for decades to come, then the odds are in your favor on the appreciation front as well.

So there are a lot of options here, and it’s safe to say that real estate CAN be recession-proof, and inflation-friendly.

If you want to learn more, check out my Youtube Channel over at bit.ly/realadamyoutube, where we have entire video series’ systematically designed to help real estate investors in Ontario skip their learning curve and start creating wealth through Real Estate NOW.