WHY OUR CONDO IS THE PERFECT INFLATION HEDGE
My wife Heejin and I own a rental condo in Scottsdale – with a small, fixed-rate mortgage and quickly increasing rent, as Scottsdale is one of the hottest markets in the country.
It is a perfect example of why real estate is such a great inflation hedge. Our rental income continues to go up while our housing payment remains fixed.
In addition, we could pay off the small mortgage now but are waiting to do so in a post-inflationary environment when dollars are worth a lot less.
In any case, this is exactly why I encourage people to buy investment real estate and it is one of the reasons skyrocketing rents are so good for real estate in general.
RENTAL RATES SOAR
Recently, The MBS Highway shared September rental data from both CoreLogic and Apartment List.
CoreLogic’s data indicated that rents increased 10.2% year over year – a 16-year high; and Apartment List showed a 16.4% increase year over year.
Apartment List’s number is higher because they only survey “new rentals,” while CoreLogic surveys both new rentals and “rent renewals” (which typically increase at a slower pace than new rentals).
Both numbers though are reasons to rejoice – if you are a real estate agent (and not a renter).
This is because those double-digit rent increases are the best reasons of all to buy real estate – for both investors and first-time buyers in rental units now.
RENT VS BUY CALCULATORS
In August, I wrote this blog: Rent Vs. Buy Comparisons in the Age of Inflation, and shared Freddie Mac’s Excellent “Rent vs. Buy” Calculator.
I highly recommend reading the blog again, but I can summarize it here.
I pointed out how the calculator showed a buyer would be $300,000 better off in seven years – if he bought a home instead of renting.
And that was using a very modest 3% annual appreciation number and only a 6% inflation rate (assuming rents go up at the same rate).
At a 10% inflation rate, a buyer is well over $400,000 better off than a renter in seven years.
So, once again, every first-time buyer who is currently renting should be aware of the above info.
INVESTORS
Skyrocketing rents are great for investors for the reasons I explain in the first paragraph of this blog.
Rents continually rise with inflation, while housing payments stay the same – making investors better and better and better off…
I know increasing rents can foster hardships for many renters, and I don’t mean to make light of that.
But, the fact remains that increasing rents bode well for both first-time buyers and investors.
Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167
