How to Profit From Inflation With Multifamily Real Estate Investing

Frank Roessler

February 28, 2023

Inflation causes prices to increase over time, lowering the purchasing power of a dollar. Savvy investors use inflation-resistant asset types to maintain their portfolio’s buying power and bolster investment returns. One of the best-performing inflation hedges for generations has been multifamily real estate investing. This necessity-based asset class is also popular because it generates more income as rents rise.

Increase Rents

Multifamily real estate investments are an ideal way to profit from inflation. This asset class has historically outperformed single-family homes and other commercial properties during inflationary periods, allowing investors to grow their portfolios.

Inflation increases the cost of goods and services while decreasing the purchasing power of a dollar. The good news for multifamily investors is that rents increase with inflation, and property values usually follow the economy’s growth.

The demand for apartments will likely continue growing as employment and wages are expected to rise. This will make it easier for you to attract tenants and increase your property’s profitability.

When more than half of the population in a city rents rather than owns a home, you are guaranteed strong rental demand. This will allow you to generate a high return on your investment and appreciate your property over time.

Another critical factor in maximizing your multifamily real estate investment is locating suitable properties. Ideally, you’ll want to find small multifamily properties in a growing and stable market.

Invest in Inflation-Indexed Bonds

As inflation continues to increase, savvy investors are turning to multifamily real estate to profit from the increasing prices of goods and services. The recent Consumer Price Index (CPI) spiked 6.8 per cent year-over-year, and inflation is expected to continue to trend higher over the next several years.

One of the ways to hedge against inflation is by investing in inflation-indexed bonds. These securities offer a fixed interest rate, but the bond’s value increases as the official inflation rate rises.

Inflation-indexed bonds are an excellent option for long-term investors. They can be purchased through TIPS, a U.S. Treasury-issued product, exchange-traded and mutual funds. They are also available in many brokerage accounts. Investing in these securities can help you hedge against inflation, which is especially important during times of high rates and rising rates.

Invest in High-Yield Debt

To profit from inflation, you should consider investing in multifamily real estate. This asset class has proven to be an excellent hedge against inflation in the past, and it can provide a steady cash flow over time as rents rise.

The rising cost of living can strain many Americans’ budgets and make it difficult for them to save for their future. As a result, investors are looking for opportunities to shelter their assets from the adverse effects of inflation.

One way to do this is by investing in high-yield debt. These bonds typically offer higher yields than investment-grade corporate and government debt but also carry greater risk.

The risks associated with these bonds include interest rate risk, economic risk, and default risk. These risks can make them more volatile than other types of bonds. However, they can also offer attractive income and price appreciation potential over the long run.

Invest in REITs

If you’re looking for a diversified investment that pays dividends and has the potential to grow over time, consider investing in REITs. They’re a great way to invest in real estate without the hassle of direct ownership, and they come in all shapes and sizes.

A REIT, or Real Estate Investment Trust, is a company that manages and owns commercial properties. It pools investments from many investors and shares rent payments with its stockholders.

REITs are a popular option for investors since they offer low-risk diversification and transparency. They’re also an excellent way to gain exposure to different industries, such as retail, health care, industrial and office space.

If you’re looking for a safe, high-yielding, and long-term hedge against inflation, you should consider multifamily real estate investing. Its strong demographics and ability to appreciate make it an ideal investment for the foreseeable future.