Should you consider multifamily real estate investments as a hedge against inflation?
Updated: Dec 1, 2021
Investors may be concerned with a coming rise in inflation. According to the US Department of Labor, the all items index of the Consumer Price Index for All Urban Consumers (CPI-U) “rose 6.2 percent for the 12 months ending October , the largest 12-month increase since the period ending November 1990.” (1) While inflation is on the increase, investors might consider how to plan their investments to be able to continue to profit through this period. Hedging occurs when an asset is purchased that will likely not have the same fluctuations as the stock market. This technique can be utilized by investors to diversify their portfolios and minimize losses if inflation causes volatility in the market.
Investors may include various hard assets, or real assets, in their portfolios to hedge against inflation. Some examples of hard assets include gold and other metals, oil, agricultural products, and real estate. This article focuses on why real estate investments, and in particular, multifamily real estate investments, should be considered when seeking a hedge against inflation.
With inflation, prices rise, and real estate values increase also. Investors gain equity with these increases, and as property values over time continue to trend upward, the appreciation may hold steady with, or even outpace, the rate of inflation. Real estate investments often do not have the volatility of the stock market. Additionally, for investors interested in wealth preservation, real estate offers a long term opportunity to see significant appreciation.
When real estate investors earn income from rental properties, such as multifamily properties that have short-term lease structures, there is potential for higher rents paid by tenants, and increased profits for investors. Typically individual rental units renew leases with tenants each year. Properties with a large number of units provide many opportunities to adjust rental terms. These properties tend to be in demand when housing prices rise in inflationary periods, as people decide to rent instead of purchasing a home. When this occurs, there are fewer and shorter vacancies, and income from new or renewed leases steadily being collected. For these investors should consider multifamily real estate investments to hedge against inflation.
How can Sequoia help with multifamily real estate investments?
With over 35 years of experience, Sequoia Equities has extensive knowledge of the multifamily real estate market and its benefits for investors. At Sequoia, we know the importance of focusing on the individual needs of our investors. We are always ready to assist our clients with any questions they may have regarding opportunities and advantages of investing in multifamily real estate. For individuals wishing to make their investments utilizing IRA funds, Sequoia can aid investors in finding the appropriate self-directed IRA custodians, establishing an account, and making a purchase according to regulations. Learn more about Sequoia by visiting https://www.elevatetosequoia.com/.
(1) “Consumer Price Index Summary – 2021 M10 Results,” U.S. Bureau of Labor Statistics, 10 November 2021; https://www.bls.gov/news.release/cpi.nr0.htm