Inflation has been a big concern for investors recently. With the Federal Reserve, printing money and pumping it into the economy, many are worried how this might effect their portfolios. While there is no certain way to predict inflation, investing in multifamily real estate can be a good hedge against inflation.
Multifamily properties tend to be more resistant to inflation than other types of investments. This is because rents usually increase along with inflation. And if managed properly, many expenses can be controlled through fixed rate debt or interest rate caps, bulk purchasing of materials and protesting tax increases. This means that your income will grow as inflation increases, while your expenses, if managed properly, can increase at a lower rate.
As a result, your profits will increase and you’ll be able to weather the inflationary storm much better than many other non-income producing asset classes.
So, if you’re looking for a way to hedge against inflation, multifamily investing is a good option to consider. Just be certain to do your homework, and invest in a quality property that will perform well in any economic climate. Click here to review a CBRE report regarding types of investments that perform best during economic uncertainty.
Additionally and less commonly understood, banks have been lending at rates that are below the rate of inflation (the real one, not the published CPI). In other words, in inflation adjusted dollars, they’ve been “paying” investors to borrow money. If the interest rate is 5% and real inflation is 9%, that means the real rate is -4%. That may not always be so, yet it is worth noting.
For these reasons, multifamily real estate should be considered as part of any well-diversified portfolio. When it comes to combating inflation, multifamily properties offer investors a stable, income producing addition to their portfolio. Click here to review a Marcus & Millichap report regarding why apartments are in high demand and becoming such a viable option, during inflation.
If you’re looking to invest in multifamily real estate, be sure to work with an experienced and reputable team who can help you find the right property for your needs. At KMR Multifamily, we underwrite deals to be as conservative as possible to protect ourselves and our investors. If you’re interested in learning how to mitigate risks, while combatting inflation, click here.
If you are interested in future investment opportunities, click here.
By Kelsie Mans-Ray
KMR Multifamily Acquisitions / Syndicator
NOTE: This information is of a general, educational nature and may not be construed as tax, financial, or legal advice pertaining to your specific offering, exemption or situation.
