Using Real Estate as Protection against Inflation: A Guide

by | Apr 17, 2023 | Inflation Hedge

Using Real Estate as Protection against Inflation: A Guide




The headlines these days are worrisome. Inflation is the highest it’s been in over a decade, the situation is volatile and the future is uncertain.

Have you ever heard someone say how it used to cost $5 for two movie tickets and popcorn? They’re talking about inflation, the rise in prices for goods and services over time.

The latest report from the U.S. Bureau of Labor Statistics shows that the Consumer Price Index (CPI), a measure of inflation, has gone up 5% over the past year. That’s the highest increase since 2008.

One way to make sure inflation doesn’t have a negative impact on your portfolio is to include real estate as an asset to hedge inflation.

#inflation #realestate #protection #diversify

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As inflation is a reality of our economy, real estate investment can be a great way to protect against inflation. Real estate has proven to be a reliable hedge during times of inflation, with the potential to provide a steady stream of cash flow and long-term appreciation. By investing in real estate, you can protect your wealth from the negative consequences of inflation.

Here are some ways you can use real estate to protect against inflation:

1. Invest in rental properties

One of the most popular ways to invest in real estate is to purchase rental properties. A rental property provides a steady stream of rental income, which can be used to offset the effects of inflation. Rental prices tend to increase over time, providing an additional hedge against inflation. Additionally, the value of the property itself often appreciates over time, providing further protection against inflation.

2. Consider commercial properties

Commercial properties, such as office buildings or shopping centers, can also provide a hedge against inflation. These types of properties often come with longer lease agreements, which can help stabilize rental income over a longer period. With longer-term leases, property owners are less likely to experience rental income fluctuation due to economic headwinds.

3. Invest in real estate investment trusts (REITs)

REITs are a way to invest in real estate without actually owning physical property. REITs invest in a portfolio of real estate assets, including apartment buildings, industrial properties, and hotels. The income generated by these properties is then distributed to shareholders as dividends. REITs provide a convenient way for investors to gain exposure to real estate without committing to owning, financing and managing real estate investments.

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4. Use real estate as a hedge against inflation

Real estate is a tangible asset, meaning that it has intrinsic value that is not tied to inflation. Unlike currency or stocks, the value of real estate is not subject to the whims of the market. In times of inflation, the value of real estate may increase, providing a buffer against the rising costs of goods and services.

In conclusion, investing in real estate can be an excellent way to protect against inflation. The key is to focus on long-term growth and cash flow. By holding rental properties, investing in commercial properties, holding REITs or using real estate as a hedge, you can protect your wealth from the negative consequences of inflation. While the specific strategies may differ, real estate offers almost unique peace of mind in a period of uncertain economic times for homeowners and investors alike.

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