Real estate – The inflation proof investment option

Millions of people choose to invest in realty every year as this tried and tested segment has a proven track record of withstanding economic upheavals. While one of the primary sentiments driving real estate investments is the joy of owning your ‘dream-realty’, there are a host of other reasons – peace of mind, security, higher returns, long-term gains, inflation proofing and steady passive income – that make real estate by far one of the best investment options available.

While there are numerous benefits to adding real estate to your investment portfolio – the key one is its ability to hedge inflation. The thought of investing your hard-earned money in an investment channel prone to market uncertainty and inflation can be anxiety invoking. The real estate market is relatively immune to extreme fluctuations and can counter the effects of inflation. Even as money devalues as an asset the net-value of your real estate investment will improve with the economy. A tangible hard asset, like real estate often sees its greatest price increases during high inflation periods. Let’s take a look at why real estate is a good bet against inflation:

Reason #1 – Rental incomes rise with inflation

One of the main reasons buyers invest in real estate is that it helps generate a guaranteed, steady, monthly income through property rentals. That’s having your cake and eating it too! Both commercial and residential rates can be increased with inflation and that in turn also increases the base value of the property. In addition, buying a house is more expensive in an inflationary environment – so the demand for rental property increases, steadily driving up rents resulting in augmented returns from your real estate assets.

Reason #2 – Longer holding nature of real estate hedges inflation risk

This one is a given – If you stay invested in your real estate asset for a long period of time – it aids equity build-up and results in considerable appreciation of your investment portfolio. The effects of inflation are minimized over a period – an advantage that your average stock investment may not provide. If you have a long-term investment horizon, appreciation in the real estate market is assured.

Reason #3 – You are the boss of your real estate investment

You know how deep your pockets are and how much you can afford to invest in real estate. That being said – you determine and drive your own real estate strategies and ensure capital appreciation or depreciation. You have the ultimate say in how much rental income your property will generate and how best to make the most in an inflation prone economy. This is vastly different from investment channels like stocks or mutual funds – where the fate of your investment portfolio rests largely in the hands of external agencies and one has minimal influence or control over the performance of and returns from these investment channels.

Reason #4 – Diversification of your wealth portfolio minimizes inflation effect

Real estate investments can lower the volatility of your investment portfolio and provide high returns. Real estate acts as the balancing factor and allows one the flexibility of considering more high-risk investments options. Even if your other investments do not yield the desired results, you still have the age old trusted real estate income to fall back on. ‘Never have all your eggs in one basket’ – is a wise adage indeed and real estate should have a place of honour in your portfolio in anticipation of rising inflation.

Today investing in real estate is affordable across investor categories and the best way to outsmart inflation. You do not need a huge cash pile to start investing in real estate. With a plethora of financial establishments willing to offer loans – one must take advantage of the additional spending power this affords. As a smart investor – a secure, tangible asset that is always in demand should be your primary investment choice. People will always need a place to live and that ensures the longevity of the real estate segment. While investing in a home to live secures your future, investing in real estate, as a rent generator is literally one of the smartest moves that one can ever make. Having a tenant pay off the loan on your investment is a hassle-free way to sit back and watch your real estate investment yield returns.

So, go ahead and take the plunge today!

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