Proven Defense Against Inflation

Inflation is skyrocketing! Prices are rising and the value of the dollar is dropping! How can you protect yourself from losing your hard-earned money? Discover 3 reasons why commercial real estate is a proven defense against inflation and 3 key strategies that outpace it.

Commercial Real Estate: A Proven Defense Against Inflation

Reason #1: As Inflation Rises, Demand for Apartments Increase

When inflation is on the rise, construction costs rise with it, and that means contractors build less. As housing development decreases, the demand will outpace the supply, which in turn leads to a greater demand for apartments. A second reason demand for apartments will rise with inflation is because during an inflationary period, interest rates tend to increase. And when interest rates go up, borrowers will find it difficult to find homes they can afford, and some won’t get loan approval at all. And, if they’re unable to buy a home, chances are they are renting an apartment.

Reason #2: Rents and Property Values Will Increase

As demand for properties rise, so will rents. When you raise the rents, you increase the NOI, force the appreciation on your property and property values go up.

Reason #3: It Outpaces Inflation

If you do one and two correctly, you will create a perpetual income driving engine that will outpace inflation. As inflation rises, your apartment building will be in greater demand, rents will rise, the value of the property will rise, and your cash flow will become an engine that outpaces inflation.

3 Key Strategies to Outpace Inflation

#1: Acquire Commercial Real Estate Assets

There are three commercial real estate assets you should focus on. As mentioned above, apartments are assets that will provide stable income and outpace inflation. Mobile home parks can do the same. They are affordable housing and will continue to be in high demand. A third commercial real estate asset to focus on is storage. When the economy shrinks, people downsize their living space and need a place to store their belongings. When the economy grows, people buy things and they also need storage space.

#2: Lock in Long-term Loans

You should be locking in long-term, low-interest rate loans now because as inflation increases so will interest rates. My strategy is to have cash flowing assets that are growing in demand, with rents and cash flow that also grow. Locking in a long-term loan now can keep the mortgage low as interest rates rise.

#3: Don’t Watch the News

This strategy might be the most important of the three. Don’t watch the news because you are what you eat. What you feed your mind will determine your appetite. The news won’t help you achieve financial freedom, that’s not their purpose. The media focuses on fear and the fear right now is that the housing market is going to come crashing down. It might, but it doesn’t matter. Whatever happens we will adjust. If the housing market does crash. What happens? People stop purchasing homes and move into apartments. As a commercial real estate investor, you’ll be thriving while others are crumbling.

Check out my post Do You Have the Mindset to Own Commercial Real Estate. It teaches practical strategies you can use to have the right mindset so you can be successful in commercial real estate investing.