Investing in Real estate may be a good hedge against inflation if prices continue to rise.At the same time, if inflation comes down and you can withstand the fluctuations in real estate, owning real estate may be a good option.
If you are holding on to cash in the bank, you may be losing out.The cash in the bank may become worthless.Inflation, like housing prices does not appear to be coming down.On the contrary, the price of the dollars decreases as housing prices increase.If inflation is at 7%, your money in the bank would have to earn more than 7% to hold its value. If the money in the bank is not outpacing inflation, then its loosing value. Average home appreciation values vary from city to city and state to state.
Real estate, either housing or land, is a tangible asset, which looks good to investors during inflationary and uncertain times. As an investor your need to make sure that the current appreciation is higher than inflation.At the same time, appreciation is only one factor.You need to investigate other factors when investing in real estate.For instance, if you are going to flip and make a 20% to 40% return and it may take two years for inflation to come down, you beat present and future inflation.If you are going to purchase real estate and make rental income and it generates more than 7%, again you beat inflation.Also, there are tax benefits.
In the end, investing in real estate is a good hedge against inflation if you do the math correctly.
By Gil Zapata
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