Multifamily Assets - A Hedge Against Inflation

We’ve all been experiencing the effects of rising costs all around. From the gas pump to the grocery store, there has been a notable change in what our dollar can buy. Last year inflation reached a 40-year high and figuring out the best way to safeguard your hard earned money probably feels daunting. Historically, when the rate of inflation is high, stock returns tend to be lower, making them a less effective investment strategy to hedge against your money's steady loss of value. So how exactly can you continue to grow your money during times of rising inflation?

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One strategy available to investors is multifamily real estate. There are a number of reasons that multifamily investments continue to offer favorable returns, allowing you to continue to grow your wealth while inflation is on the rise.

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People Will Always Need a Place to Live

During times of high inflation, home prices and interest rates also tend to rise. With so many people being priced out of buying a home, the need for multifamily rental properties increases. Historically, multifamily property investments have been in the unique position to weather drastic economic changes. This is because no matter how high inflation gets, people will always need a place to live and multifamily properties are necessity-based assets.

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Asset Appreciation Over Time

Over time, multifamily properties tend to increase in value. Additionally, the ability to force appreciation of multifamily properties makes it an asset class that can keep up with the rate of inflation, protecting the value of your dollar.

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Rental Prices Rise as Inflation Rises

Rent prices have the tendency to go up alongside inflation. The benefit of short lease terms, typically 12 months, give operators the opportunity to anticipate economy changes and adjust rents accordingly.

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Cash Flow

While cash flow may not always be an investor's top priority, during times of rising costs, it becomes a much more important benefit. When the cost of everything you buy on a daily basis goes up, investment distributions can make all the difference.

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Tax Benefits

It's important not to forget about the tax benefits associated with multifamily investing. Offsetting W2 income with investment write offs results in tax savings that can significantly add to the returns of an investment.

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By no means is multifamily investing without its own set of challenges. With rising inflation, multifamily operators typically experience higher costs associated with operations and renovation costs, which can definitely impact the bottom line. This is why it's important to invest with experienced syndicators with the skills to navigate the changing economy and make the necessary adjustments to protect and continue to grow their investors' money.

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We are not accountants or financial advisors and always recommend discussing your financial goals with the appropriate professionals. Schedule a call below to discuss how we can help you get started in multifamily investing.

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Disclaimer: The information provided in this post is for educational purposes only and should not be considered as advice. Always consult with a qualified professional before making any financial decisions.