3 Ways Real Estate Investors Can Benefit From Inflation Story

Like an old college roommate, inflation showed up uninvited to the party, got a little out of control, and stayed much longer than any of us anticipated. Could our dear friend actually have any redeeming qualities?

The party supplies cost substantially more than they did a year or two ago, and no one likes to pay more money to get the same thing. There is a flip side to inflation, though, and some people can benefit from its seemingly unpleasant behavior.

Dr. Peter Kim tells us that real estate investors are among those that can more easily look on the bright side, and he’s here to tell us why. This Saturday Selection was originally published on Passive Income MD.

Inflation erodes the cash in your pocket but it also erodes the outstanding debt that you have assuming it’s at a lower variable or fixed interest rate.

Inflation Can Help Erode Debt

Rents Increase

When inflation strikes, rents tend to increase. It is essentially a “goods or services” that follows the inflation line. Demand for rentals also tends to increase during times of rapid inflation, as well. As I’ll mention next, people tend to get priced out of buying homes and so demand for rentals increases. Increased demand equals increased rents.

Prices Appreciate

I don’t think it’s a coincidence that home prices across the country still continue to increase at a rapid rate. Interest rates are low, inflation is high, and there is a ton of cash out there. So prices are appreciating rapidly, building equity for rental property owners.

We’ve been living in a pretty low inflationary environment for years and it sounds like higher rates of inflation are here to stay for the time being. Investors will have to adjust their strategies to keep ahead of the rate of inflation.

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