What to Do About Inflation Increase and Real Estate
Inflation increase can hurt your chances of selling your home. Here are a few tips when dealing with inflation spikes.
“Inflation is when you pay 15 dollars for the 10 dollar haircut you used to get for five dollars.”
Sam Ewing may have given us that humorous line about an economic inevitability, but inflation is no laughing matter when it comes to your investments. The devaluation of your dollar can have a profound impact on your financial outlook.
Fortunately, that doesn’t mean that you have to throw up your hand watch your money lose value. There are steps you can take to counteract the effects of rising costs and, in some cases, even grow your investments.
One of the most tried-and-true keys to beating the rising costs of goods is investing in real estate.
Here’s a quick guide to inflation and how you can use real estate investment opportunities to hedge against — and even beat! — inflation. Read on and see what you can do to secure your families future.
What Exactly is Inflation?
In a nutshell, it’s the general increase in prices for the goods over time. As Mr. Ewing said, it’s when something that used to cost five dollars now costs 10 dollars.
In a more specific sense, it’s the result of the creation of more money in the economy. For example, if there is $100 in a system, of which you own $20, then you own 20%. If more money is injected into the system — printing more money — or if the demand for goods goes up, your portion, or buying power, shrink.
That’s it. And it usually happens when markets turn downward.
So what can you do about it? While you can’t fight it, you can position yourself to gain from it, and real estate is the best way to do so.
Real Estate as an Investment
It’s no secret that real estate is one of the best investments around. Historically, it shows proven growth and stability. It even performs better than stocks.
The reason for real estate stability is that the longer you hold on to your property, the more you stand to gain. As markets climb, so does your equity. When the markets fall and prices increase, the base price of your home rises as well.
How so? Remember that haircut. The house you paid $100,000 for may now be worth $150,000. That’s a big gain for merely holding onto property while the markets corrected.
Real Estate as Income
Another great thing about real estate is that you can rent out your property for extra income (if you make the right decisions). If you can enter into a fixed-rate mortgage — or no mortgage at all if you’re lucky! — then you can use your investment as a rental property to rising costs.
Not only can you use the rent you charge to pay off your mortgage, as prices climb you have justification to raise your rental rates. This means that you can add an extra $50 to $100 per month at every lease, paying your mortgage off that much quicker or lining your pockets with that much more money!
If real estate seems like the answer to g that you’ve been looking for growing your wealth, click here for more information.