Real Estate Investing For Inflation Protection In Late 2019 – is it smart to take a mortgage and invest in real estate now for wealth creation?
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HOW TO: Hedge Against Inflation
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As we approach the end of 2019, it’s becoming increasingly clear that inflation rates are ticking up. This can be a worrying trend for many investors, as rising inflation can eat away at their returns and erode the value of their investments over time.
However, there is one asset class that has historically been a reliable hedge against inflation: real estate. By investing in property, you can not only protect yourself against inflation, but also potentially earn higher returns than other asset classes.
So why is real estate such a strong inflation hedge? There are several factors at play. First, property is a physical asset that exists in the real world. It’s not subject to the same market forces as stocks or bonds and can’t be inflated away like fiat currency.
Second, rental income from property tends to rise along with inflation. If your rental income is fixed, it may not keep pace with inflation, but landlords often have the ability to raise rents to match rising costs.
Finally, property values tend to appreciate over time. As inflation rises, so do construction costs and the price of land. That means that the value of your property is likely to increase, giving you a potential upside beyond just rental income.
Of course, real estate isn’t a foolproof investment. There are risks involved, including fluctuations in the housing market and unexpected expenses like repairs or vacancies. But if you’re looking for a way to protect your portfolio against inflation while potentially earning high returns, real estate is worth considering.
So how can you invest in real estate for inflation protection? There are several options, ranging from buying individual rental properties to investing in real estate investment trusts (REITs).
Buying rental properties can be a lucrative option, but it also requires a significant amount of capital and a willingness to manage the property yourself or hire a property manager. If you don’t have the time or resources for hands-on property management, REITs might be a better option. These investment vehicles allow you to pool your money with other investors to invest in a diversified portfolio of real estate properties.
Whether you choose to invest in individual properties or REITs, it’s important to do your due diligence before committing your money. Research property values and local rental markets to find properties that are likely to appreciate and generate consistent rental income. And always keep an eye on inflation rates to ensure that your investment is providing the protection you need.
In conclusion, if you’re concerned about rising inflation rates, real estate investing can be a smart way to protect your assets and potentially earn high returns. With the right research and investment strategy, you can build a real estate portfolio that provides a solid hedge against inflation in late 2019 and beyond.
Real estate isn't for me as the paperwork is very complicated and too much taxes at least in my country… Not to talk it's anything but liquid. Also, I think homes shouldn't be used for “investing” (rather speculating) as it's a critical human necessity and many can afford to buy or even rent a home these days… People mortgage the most part of their lives and become slaves just to own a home, it's nuts!
Hi Sven! But what happens if theres a currency reset? Which is very very likely within 30 years. From historical examples we can see that debt was always treated worse than credit (i.e. 100€ credit went to 20 new currency and 100€ debt went to 30 *new currency*)
let's say when the mortgage is cheaper than paying the rent, should one just pay off the house if he has enough cash? or use the money to invest in stock? the reason i ask is because the investor is retired and he cannot apply for mortgage.
you have an edge with your own house , you have to live somewhere, i made my money in property , in the uk , we don t pay capital gains tax on our houses we live in ,if your selling and buying the market is pretty irrelevent
This issue is so much more complicated for Millennials. Saddled with college debt, most can't afford a home that is conducive to happiness relative to renting with a friend or two (can't beat the price that way either). Imagine buying a dump you are unhappy in, the market turns, and you get stuck with it for a decade only to break even on the home price. Put more simply, its also about quality of life.
Best way I can see it is if you can convince the bank to loan enough for a home big enough to rent out a few rooms to friends…best of both worlds.
Too bad singapore doesn't have fixed rate 30 year mortgage loan…. 🙁
In Germany and Berlin especially there is rigid regulation of the rental market for housing coming up. For example according to the draft of a law planned to come to pass in Berlin next year rents cannot be lifted across a certain fixed level and rents must be lowered for all the properties where the rent is surpassing these certain fixed limits. This inevitably lowers the market value of all real estate affected. I am just reporting this because in my view and at least in Germany there is a big political risk for people who rent out especially if times should get rough as then socialist "solutions" of social problems will become more popular.
In Berlin Germany the socialist provincial government will limit the rents to a maximum of 8 EUR. The prices will collapse. If this experiment will be successful (for tenants and voters), a lot of metropolis in Europe will follow.
The government is also aware that people are doing this and is going after people that buy houses to rent out/resell etc:
https://www.ad.nl/politiek/kabinet-schiet-spaarder-te-hulp-tot-440-000-euro-geen-belasting-meer~a7559faa/
reddit.com/r/DutchFIRE/comments/d0fxbb/geen_belasting_meer_op_spaargeld_tot_400000_euro/?sort=confidence
Finally Nizozemska kuča videos, been waiting 6 months for that!
If I could get 3% fixed interest I would get as much loan as possible and then begged some more on my knees. Unfortunately this ain't gonna happen. Only variable rates here for average people. If one got several properties (debt free) or some other assets to back the loan you might get it. But if I would ask fixed interest banks would laugh at me 🙁
And where I live house prices are declining and rents too. And this is long term trend at least for prices. Rents might keep with inflation. If there are tenants in the future of course… Cities where people are moving house prices are sky high and I wouldn't get enough loan to buy a house there.
So only stocks for me sadly.
Great video. Unemployed rate in local area. Real gage. Lubbock Texas lowest unemployment rate prices skyrocketing.
I have differing thoughts on this. A property should always be part of a greater plan. Actions have consequences.
I know people who have beautiful houses, but can’t afford to retire because of the costs etc. I often sit, drinking coffee, in their brand new, expensive kitchens, listening to them tell me how little Timmy is all grown up and is now wanting to be a club promoter, so they are having to pay for his rent whilst he gets on his feet. Mrs Wife feels she has a flair for interior decorating, so has started a business with a friend etc etc.
I have other friends who slog their guts out, barely making ends meet, two or three jobs. Their kids did great at school, but are unsure if they can afford the college fees so might have to go straight into work.
Me- I’ve learnt just to politely nod, after all no one likes a smug arsehole sitting in their kitchen. Perhaps this says more about the tolerant kindness of my friends, rather than their bad financial planning
If people cant do real estate investment. Should we buy reit ?
Hi Sven, unfortunately in Switzerland we can fix the rate (~1%) for max 10 years, what do you think about? thank you!
No one will give you fixed rate mortgages!
All banks suggest fixed for 3-5 years rates in the best case…
Wished this applied to Australia… No fixed rates here. 5 years max
Great video Sven! Can you, or someone else, please answer the following question, maybe you could talk about it more in a video. What is the minimum amount of cash or amount in OTHER assets you want to own before considering purchasing real estate? I have heard many horror stories of people jumping in prematurely, and putting all their eggs into one basket(property), and then their cash flows dry up and they become house broke due to the costs. Should a property amount to maximum 20%, 40%, 60% of your total net worth? Please let me know what you think, thanks.
We have max 5 year fixed-rate mortgage here… I’ll stick with stocks 🙂
Hi Sven, your thoughts as to overpayments on my current mortgage please. I have fixed rate about 4.5% (uk)and can pay maybe £500 per month over at moment, so this is going to be a good inflation hedge or instead of investing in a reit? If we move house and I can get the long term low rates I agree that is a good strategy. Thanks.
I gave up on buying property.
It's too risky because we can have price control from governments in Europe.
What If the property market went into a bubble already? People take credits to buy extreme expensive flats or houses and them pay off in 40 years or more (based on equal rent paying)… it used to bei <20 years…
Hi Sven, which are those videos about real estate prices? (I've watched your videos about investing in REIT's only) thank you so much!
Well of you're going to move in a few years why would you care about the price decades from now? I can't imagine just 'renting it out' is as easy as collecting dividends off a stock, especially when the property is 100s -1000s of km away.
i cant afford properties but i do buy reits… people talk about gold being rare, but you know what theres a limited amount of? land
Buy real estate don’t buy gold
Common sense is found here
In Canada you cannot get more than 5 years fixed mortgage.
wonderful advice but really specific to your country or anywhere that offers 30 year fixed rate.
in australia there is no such financing.
4 year fixed is about the best and of course people think rates will fall further which makes everything uncertain. who wants to be stuck finding a new financing rate in 4 yesrs time with a fixed asset?
One concern with long term investment in European properties must be long term demographics. Real estate prices will increase only in areas where you have a growing working-age population; in areas of decline, you will experience falling prices. So, be choosy where you invest!
Realestate takes even more patience and knowledge than clicking buy on robin hood. 80-97% leverage is common. Mistakes can damage people for years ahead. People that don’t get it should just look at other investments or just buy a house they like to live in long term. Your partners the banks will not let you over pay by too much cause they have the majority of the risk with a default.
Your job must be incredibly secure. You must be savvy about maintenance and utilities and insurance. You must see the time spent on the house as instrinsically fulfilling and/or worth the joy you derive.
The biggest downside is limited optionality. You must commit tot he area and a career. Very few can pick up jobs overseas and simply rent. What about the money for a property manager and the time spent managing the manager?
I'm waiting for the coming negative mortgage rates in Europe. Than I fix them for 50 years and hope that the lender will not go bankrupt… 🙂
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Nobody can really predict a crash. The only thing you can do into look at 100 deals and find something undervalued in a good location. Thats my view.
Sven carlin, what’s your opinion on Milton friedman?
2 Million Euros…. And people will live on the streets cause nobody will be able to afford to rent nor to buy. And as we know salaries doesn't keep up with inflation rates.
Who the F have a 100.000 down payment these days?
Inflation? What inflation? Asset price bubbles!
Sven, why did you sell your house then?
With a fixed rate you will be building equity cheaply regardless of what the property price does. Once the mortgage is paid off, there will be a long term cash flow stream.