With the price of meat, potatoes and gasoline going up like a runaway balloon, you might be searching for a silver lining. Look no further than your monthly mortgage payment. Yes, you’ve taken care of your real estate investment and now it will take care of you.
In times of inflation, your home goes up in value as the buying power of the dollar goes down. Plus, and here is the silver lining, the size of your monthly payment stays the same. That’s right, you get to pay your debt with even cheaper money. Renters don’t get to do that. Landlords are the first to see the opportunity to raise rents.
What about other investments? If your investment or retirement account pays you a fixed return, you are just like the mortgage company receiving less real cash each month. If your money is in stocks or precious metals, you are subject to the ups and downs caused by supply and demand. Real estate remains your best investment.
Should you buy more real estate in times of inflation? Especially in these time of low interest rates, the answer is a resounding yes. It doesn’t take a rocket science degree to see that borrowing money at 3% interest and repaying it with dollars that are 5% to 6% cheaper is a no brainer. The secret is to use this formula to buy real property, assets that retain their value.
Does this mean that you should buy a rental property, a piece of land or partner on the purchase of a commercial property? Perhaps. Just be sure the investment makes sense – inflation is not the only reason to justify such investment.
And what if you do not currently enjoy the advantage of home ownership? Find a way to buy now. If you have a credit obstacle, get it repaired. If you have a down payment shortfall, borrow from family, have a yard sale, or find some extra dollars to put down. If you need more income, take a second job, start a home-based business, or even pool your resources with another person. Just find a way to buy real estate now.
By Joseph Callaway
Joseph Callaway is co-owner of Those Callaways, an independent brokerage operating in 85254 for 25 years. For additional information, visit ThoseCallaways.com or call 480-596-5751.