Real Estate and Inflation – How does it affect Triple Net Lease Properties?
Real Estate and Inflation
Many people are concerned about real estate and the downturn of the market. With so many people losing their homes, the economy is hurting. Even though property owners are seeing some rough times, the opposite could be said for investors who know what they are doing.
Investing during a slump in the economy can actually broaden an investor’s prospects and even bring in great, profitable returns.
If you are thinking about investing right now, this is a great time to do it, if you follow some strategic planning and envisioning.
Real estate is a business and should be treated as such. Even though there is a potential for a lot of success, there is some risk in purchasing during an economic slump.
Inflation can have serious effects on investors if the income and investment growth aren’t keeping pace with inflation. The good news is that there are some things that you can do to minimize the effects of inflation and how to come out on top.
Do you remember what a bag of groceries cost in the late 1970s? Compare that with what a bag of groceries will cost you today. Now imagine what you think it will cost in 2030. Interestingly enough, between 1977 and 2005, inflation devastated the purchasing power of the American dollar by almost two-thirds.
Looking at this grocery example helps you understand the effects of inflation. Over a period of time, mild inflation can cause some serious issues. Even at a mild inflation growth rate of 4% a 30-year-old earning $30,000 annually will need to be making $118,380 to enjoy his same lifestyle.
Most companies relatively keep up with inflation and compensate you for it. Parents of the 30-year-olds today were making about $9,000 a year when those 30-year-olds were born.
Inflation causes the most damage to retirement. If the 30-year-old we have been talking about wants to retire when he is 65, he will most likely live for another 20 years. His $118, 380 yearly income will need to at least double by the time that he is 85. And that is only figuring a 4% inflation increase.
So what can you do to minimize how inflation affects you? Investments are a great way to help reduce the effects, particularly a stable investment like property.
Real estate factors about 10% of the total output in U.S. economy. If real estate weakens, so will construction jobs and overall employment.
When there is a decline in real estate sales, the prices of homes go down, and essentially the value of homes. This then affects the loan industry.
You have probably heard that when there is a slump in the stock market that is the best time to buy. The same goes for real estate. As more and more properties are purchased, the market will eventually see a rise which will make your selling power and turn-around all the more stronger.Re
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