YESMF – Is Inflation Good for Multifamily?

by | Jul 28, 2022 | Uncategorized | 0 comments

Inflation is the problem; Apartment investing is the solution.

Never a dull moment in apartment investing! As my mentor says, “Cash is trash!”

The definition of inflation: the general rise in the price of goods and services. Regardless of the cause, inflation erodes the purchasing price of the dollar. That’s why we say cash is trash! The more cash you have sitting in the bank vs in investments, the less value you have.

The federal reserve acknowledged due to inflation, prices would likely not return to previous levels, and it was time to raise interest rates. I know you’ve noticed that the cost of goods has risen. In just a few months, gas went from 3.25 to 4.75 a gallon in Colorado.

AND in multifamily the cost to buy a property along with lending rates have gone up exponentially since November 2021.

However, as the fed hikes interest rates, the stock market becomes way more volatile and riskier. And even though inflation has reached 8% at this time, Multifamily is still a great hedge against inflation.

This environment, which is marked by higher interest rates and inflation, will require a reassessment of risk by investors. Landlords often witness more demand for space as spending on goods and services increases. Rising interest rates are indicative of a growing economy and we need to be educated to make the right decision. 

Multifamily has a great track record and even in other inflationary times, this asset class has outperformed other types of investments as housing is always needed! Especially with the rise of prices to build or buy a single-family home.

If you are going to invest in multifamily, it’s important to choose the right deal with a proven sponsorship team in a primary market. Make sure the team understands the new lending rates and can make the business plan work in this environment.

 

 

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