FIGHTING INFLATION THE SMART WAY
Inflation is reaching record high rates, which means that the money sitting in your bank account is becoming less valuable every day. Typically, inflation is around 3%, but recently, that number has been closer to 8.5%. Essentially, if you have $100k sitting in the bank, you are losing about $8,500 worth of value every year. That is why it is so important to be investing your money during inflationary periods. Wages may not be increasing proportionally to inflation, but there is one industry that is beating inflation, and that is real estate. Historically, real estate always rises in value faster than inflation can devalue money. Real estate, on average, yields about 10% annual returns, and that number has been a lot higher recently as well (Average Annual Returns for Long-Term Investments in Real Estate (investopedia.com)). Those returns do not take into account all of the other benefits of real estates, such as being able to write off the paper “losses” such as depreciation on your taxes. These returns are not going anywhere anytime soon, especially in multifamily.
Real estate remains one of the safest investments because there is a housing shortage in most parts of the country. The demand for housing has remained higher than the supply since 2008. According to Fortune.com, the housing supply has fallen dramatically since the start of the pandemic in 2020. Housing is one resource that is always in demand, especially in places with increasing populations and tourism. Naturally, everyone needs a place to live, and right now, the United States does not have enough inventory. Real estate is especially great at combatting inflation because it’s a necessity – meaning that when prices of other necessities start to rise, so do rents. With the current inflation rates, you either use your money or lose it, so the best time to start investing is now.