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Real Estate Investing as Inflation Hedge

Forbes Magazine recently devoted an entire section to Real Estate investing. It starts on Page 36 in the August 3rd issue. We would be happy to provide copies of the articles for any of you.

The articles illuminate many of the reasons we have been discussing that make real estate a fantastic investment in this market.

One of the most significant enticements for sophisticated investors is the “inflation hedge” real estate offers. This is a good selling point b/c many people are concerned that there is no way the Federal Government will be able to pay off their expanding debt obligations without “monetizing” the debt (printing money to pay it off). This will trigger tremendous inflation if it takes place.

Buying an investment property with a 75% loan-to-value fixed rate loan is an excellent hedge against inflation for two reasons: (1) much like commodities, real estate tends to increase in value at about the same as inflation; and (2) you can pay off a loan that was borrowed in today dollars with tomorrow’s much less valuable dollars (in inflation occurs). This is somewhat confusing, but rampant inflation is a huge windfall for debtors with fixed rate loans.

Our point is to remind everyone that the Investor Market is every bit as robust as the First Time Homebuyer market; low rates, low prices and the threat of inflation make this the best of all worlds for investors.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167