I just heard Elon Musk telling a group of his investors that now is a good time for them to invest in real property as a hedge against inflation.
In other words, Elon is talking about using their capital to expand or make improvements to their manufacturing facilities by adding new land, buildings and/or machinery.
Inflationary times normally signal a rough patch for stocks. It makes sense to put your capital into real property because your cash becomes worth less, while real property generally increases in value along with inflation.
For individuals investors, multi-family income properties are by far one of the most reliable and profitable ways to hedge against inflation.
Not only will multi-family investment property normally increase in value along with inflation, but you can also earn great returns which include:
Appreciation: Aside from increases in value due to inflation, we normally see 3-5% appreciation compounding every year.
Leverage: Your investment capital is leveraged by borrowing at historically low rates
Passive Income: (in a desirable property, rents tend to escalate year by year, but rents also tend to increase with inflation )
Loan Principal Reduction: Your tenants are paying down your debt every year which is money in your pocket.
Tax advantages:
1. Depreciation Deduction (in addition to operating expenses). 2. Lower capital gains rates on sale. (can often be deferred and rolled forward into another investment using a 1031 exchange).
All of these add up to make your “hedge” a great investment for you to build wealth, but If you’ve listened to me before, you know that I’m always talking about the many advantages of building new multi-family investment property as opposed to buying older buildings.
To learn more, grab a copy of my new book on Amazon:
Don’t Buy a MULTI-FAMILY! BUILD IT
I’ve also included a link in the text below for a free eBook, so you can start reading right away.
