Real estate has always been a tried and true method to retain your money’s value against the threat of inflation. However, the market has had a lot of ups and downs since the pandemic, making investors question whether becoming a landlord is the right path to protect their money.
After all, the job requires so much work, like marketing your vacancies, drafting a suitable contract to avoid liability issues, tending to repairs, and resolving tenant complaints. Considering the time and money requirement, determining if real estate is still worth the hype would be wise.
This article answers the burning question, are real estate investments still a safe hedge against inflation? So if you’d like expert guidance on the subject, stick around until the end.
Are Real Estate Investments Still a Safe Hedge Against Inflation?
Inflation has been a cause for concern for many investors since early 2020. First, the COVID-19 pandemic ground the economy to a halt causing a ripple effect that saw the world facing the worst price hikes in nearly 40 years. As of January 2023, the American Consumer Price Index stood at 6.4%, and while that’s lower than last year’s value, it’s still relatively high.
The current market outlook has made traditional investment options like bonds and stocks less attractive than they were a couple of years ago. However, despite higher interest rates, real estate has remained an inflation resistant-asset.
Between the widespread adoption of remote work and higher demand for housing, real estate has remained an attractive investment option. However, buying in is much more expensive, with mortgage rates increasing daily. However, for savvy investors with the right financing option, owning a rental property is an excellent way to earn a steady, semi-passive income. If you want to maximize your returns, look for a competitive property manager that can manage your business efficiently. These professionals could help you navigate higher interest rates which will inevitably hike your mortgage fees and eat into your cash flow.
3 Ways to Counter Effects of Inflation
One of the best ways to counter the effects of inflation is to review your savings. After thoroughly inspecting your expenses, you’ll be surprised how much money you leave on the table. You could save money by scheduling regular maintenance, switching to LED lights, or using low-flow taps. In the long run, the money you save could go to your emergency fund, so you’re not strapped for cash when something in your rental needs repair. Building a saving habit can also help you achieve more financial freedom.
Invest Savings To Increase Rate of Return
Another way to counter inflation is by investing the money you save. Suitable investments create the opportunity for a higher rate of return than allowing your money to sit in a bank. According to mortgage rate predictions in 2023, real estate has a promising future, but you can consider other investment options like crypto, mutual funds, or stocks. You could even look into other forms of real estate investments. For example, using your second home as a vacation rental or flipping a house could be another income source. Remember, a diversified portfolio is less volatile and more likely to earn higher returns.
Finally, it would be best to remember to adjust your savings and investment goals according to the season. Planning to save a quarter of a million dollars might not be realistic for you in the middle of an all-time high inflation. Before setting your goals, you should always consider your current financial status and market conditions. The last thing you want is undue pressure from setting unrealistic expectations.
You don’t need to compare yourself to others. Instead, focus on committing to a plan considering your bills, debts, and income. Put your goals down on paper to review them later and keep yourself on track. Remember to set specific and time-bound goals to keep you motivated on the task at hand.
That’s a wrap! Despite consumer prices being one of their highest in decades, real estate investments remain a safe hedge against inflation. Although interest rates are high, there’s a significant demand for investors that can supply the public’s need for housing. Thus, with the right strategy, you can position yourself with the best property to protect your money and earn interest.
If you own property, you can counteract the effects of inflation by looking for ways to cut costs and save more money. You can also diversify your portfolio by adding over investments, and remember to review your financial goals as needed.
Contact an expert if you need guidance with any real estate process step. A professional property management company can help you achieve your financial goals and stay afloat in such times of uncertainty.