Let’s start by being honest with ourselves. I know, it’s not always easy, however you will thank yourself later. Inflation is a real thing and not just in how it is affecting your food or gas budget. It is also that the Federal Reserve looks to have at least a 2% inflation rate year over year. What does that mean for you? It means that your money is worth 2% less each year and so is your spending power. And if your money is just sitting in an account, it loses 2% of it’s worth each year without all the extra factors. I can almost assure you that you are not getting returns from your bank that keep that loss from impacting most around you.
Real estate is a good investment at all times. Partially because the value of the asset will continue to rise. For exactly the reasons that you just read. But in times of high inflation. Multi-Family real estate is your best asset class. And multi-family real estate is the best of all the classes. There are several reasons why, but let me start with the one that is most important to you, the reader. CASHFLOW! In times where the value of the dollar gets lower you want to have more flow of consistent and predictable income. Which is what having an apartment complex offers. Most people will tell you to go get some rentals. SO you get one by one and after 10 years you have 10 doors. Each door gives you an income of $1000 per door. That’s great. $10,000 a month after 10 years. Or you can get one 50 door multi-family unit. Earn $400 per door. And have an income of $20,000. Double the income potential with one purchase instead of 10.
While that smile is still on your face, also remember that as inflation rises, so does the value of your asset. If you paid $1.5M 10 years ago (assuming the normal 2% inflation that the federal reserve is looking for each year) you would have made over $300k without doing anything. No improvements, no rent raises, nothing. You just get to sit back and collect the value added to your Net Worth. What’s even better for you as an investor is the fact that as a taxable entity, you have the ability to write off your depreciation as well. Please go speak with an accountant or certified financial planner before making those decisions. But with the right help your investment will cover much more than just the asset. Just like anything in life, there is give and take. This is true with family, business, life, and yes real estate too. If inflation is on the rise, like it is currently, then so is the value of real estate. The best thing about that fact in relation to multi-family is that up or down you have several ways to profit. And isn’t that the best way to invest. There are multiple ways to get into a multi-family deal. Then you also have multiple ways to stay in the deal. Or multiple ways to exit. No matter what direction you choose to go with your investment, you have options. All of which give you protection against inflation and the loss of your dollar’s value.
