Is the Threat of Rising Inflation a Concern for Real Estate Investors?

Randolph is a Multifamily Investment Sales Broker with eXp Commercial servicing Multifamily Buyers and Sellers in the Greater Chicago Area.

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Signs of Inflation Starting to Appear
- Many essential production materials remain in short supply due to pandemic driven slowdowns
- The economic reopening unlocked pent-up disposable income to limited supply of products, pushing prices up
- While rapid inflation is concerning, real estate investments have historically been strong hedges against inflation
Rising Rents Help Real Estate Stave Off Inflation
- Long-term leases typically have inflation escalation clauses that lift rents based on an inflation measure
- Apartment rent growth outpaced inflation the past 10 years as rents are typically realigned with lease renewals
Inflation Incited Appreciation Can Benefit Investors
- Inflation drives up rents, which raises property values
- Since real estate investors often use leverage, their return on the capital they put up is amplified
- Real estate can serve as one of the better investments to ride the current bout of inflation