In This Post
- Real Estate Inflation: Good or Bad?
- How Inflation Effects Property Owners
- How High Inflation Benefits Property Owners
- Consider Your Investment Goals
- Conclusion
First came the Pandemic…then came Real Estate and Inflation.
The jury may still be out on whether we can officially call these times a recession, but inflation has definitely made its presence known, and it has had a significant impact on the economy.
But what does this mean for real estate investors? After all, inflation affects the prices of goods and services, and housing and materials are no exception.
So is inflation good or bad for real estate investing? Let’s take a closer look at this important question.
How Inflation Affects Property Owners
We typically see inflation as a negative force in real estate investing. This is because higher levels of inflation lead to higher interest rates, which increase borrowing costs for potential homebuyers.
As a result, home prices tend to stay lower than they would otherwise be if there was no inflation.
On the other hand, there are some positives associated with inflation when it comes to real estate investing.
For example, if you own rental properties and the rent prices increase because of rising levels of inflation, then you might make more money from your investments.
Similarly, if property values increase because of rising prices in the area (which could be caused by higher levels of inflation), then that could help you earn more capital gains on your investments when you decide to sell them.
How High Inflation Benefits Property Owners
It’s also important to note that while higher levels of inflation can have a negative impact on the economy (i.e., fewer people will be able to afford homes), it can also benefit certain individuals who already own property or are looking to invest in real estate.
This is because those Property Owners may be able to take advantage of lower borrowing costs when financing their investments (since interest rates are typically lower during periods of high inflation).
Consider Your Investment Goals
To sum up, whether high levels of inflation are good or bad for real estate investing depends on your individual circumstances and investment goals.
If you are looking to finance an investment with borrowed funds, then high levels of inflation could make it more difficult, since borrowing costs and contractor costs tend to go up during these periods.
If you already own property or are looking for capital gains from your investments, then higher levels of inflation might benefit you in certain cases.
Ultimately, though, it’s important that investors do their research and understand how different economic factors like inflation can affect their investments before making any major decisions with their portfolios.
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