Becoming A Landlord Is the best Way you Can Sheild Yourself from Inflation.

Becoming a Landlord is the Best Way you can Shield Yourself from Inflation

If you are a follower of news headlines, you must have realized that everyone seems to be talking about inflation nowadays. And it is worrying! For the past ten years, we have been experiencing the full force of inflation in 2022, making the situation extremely volatile. So, why now? Why is inflation such a big deal today, and are you safe from inflation as a landlord?

First off, no one is safe from inflation; it cuts across the board from the rich, and the poorest suffer even more! Today’s economy seems to be doing so much better. It might remain that way for a while, driven by monetary and fiscal stimulus programs, record levels of job growth, robust consumer spending, a robust housing market, and the successful rollout and vaccination of the Covid-19. In addition, just recently, the president signed a $1.2 trillion bipartisan infrastructure package, while another proposed $1.7trillion “Build Back Better Act” is still in negotiations at the congress.

BUT IS IT NOT TOO EARLY TO SPECULATE A GOOD YEAR?

Indeed. Remember, the pandemic is far from over, and new variants keep emerging; there have been spikes of new cases each day which ultimately might disrupt the global economic recovery. And in its response to the high inflation, the Fed began to taper, and it will likely raise the federal fund’s target rate in 2022, further discouraging spending and borrowing by the consumer.

HOW IS THE REAL ESTATE MARKET PERFORMING UNDER THESE CIRCUMSTANCES?

We all have heard that real estate is a good hedge against inflation. Well, that is true, at least partially. However, you need to understand that as a landlord, you will have the ability to raise the rents under certain economic conditions, which will increase the property value. Another fact you must understand is that many real estate leases usually come with contractual rent bumps, which are generally directly linked to the annual inflation rates. The third fact, when inflation starts rising, that means even the replacement costs will increase too, including the costs of

construction materials, labor costs, and land parcels.

One of the ways that you can use real estate as a hedge against inflation is by investing in a multi-family property. Unlike most commercial properties, which usually have multi-year business leases, individual rental units usually renew leases annually. Therefore, the more units a building has, the more opportunities to adjust rents accordingly.

Furthermore, multi-family properties like apartment complexes are unique asset classes in that they are always in demand. While that is true, they also receive a high turnover rate of 47.5%. When there is a shortage of building materials and labor, home prices have significantly risen, which has, in turn, created an increase in rental rates and property values. Together, these two factors equal a property that will likely be always be occupied.

I would love to highlight that expense reimbursement, which is a component of the lease, is another way real estate can pace inflation. Understand that leases pass through some form of property’s operating expenses to the tenants regardless of the type of building structure. For example, the triple net lease property holds the tenant 100% responsible for the property-related expenses. Therefore, in short, when utility costs and maintenance fees rise, the landlord is shielded, at least partially from the effects on the property cash flow.

Home Ownership

by Eric Lawrence Frazier MBA

Home ownership brings stability to individuals and families who have never had a dwelling place that they could call their own. There is something special about owning real estate that is unlike anything else on earth you can own.

Real Estate you own is not like cars that decay over time and you have to replace them. Real Estate you own is not like clothes that go out of style and you have to buy new ones. Real Estate you own is not like expensive vacations or experiences that only last a moment in time. Real Estate you own is not like an apartment where the landlord may increase the rent until it’s no longer affordable. Real Estate you own is not like staying at your parents house where you know can’t stay forever.

Home ownership is the beginning of wealth that increases over time and becomes your estate & legacy Home ownership is the pride of a mother nurturer and the kitchen her domain Home ownership is the pride of a father provider and protector of his territory and family. Home ownership is the foundation of permanence and the place where life happens, birthdays celebrated, deaths mourned. Home ownership is the place you build memories that can never be taken from you. Memories etched in walls and concrete, experienced in rooms and floors, Memories living in trees and shrubs planted by your hand. Howe ownership is the manifestation of you - your style, your colors, your smell, your stuff, your junk, your memories, your yard and your spaces, your life.

It’s the height markers on your first child’s bedroom wall. It’s the hearts drawn in the concrete slabs when you pour your patio floor It’s the birthday parties, and anniversaries in the living room and kitchen. It’s the back yard barbecue with friends, neighbors and family contentions it’s the high school and college graduation, and wedding receptions Its’ the family nights and block parties and the fellowship of family connections

Home ownership

It’s more than real estate. Land, brick and mortar, wood frame construction and chicken wire. It’s more than money saved, gifts recieved and grants obtained It’s more than the debt you incur to buy it. It’s more than the payments you make to own it. It’s more than the appreciation that comes with keeping it over time. It’s memories, it’s family, and it’s life that can happen in one place Until you say it’s time to move.