Key Takeaways: Buy and hold real estate is a long-term investing strategy. Inflation actually helps the rental housing market by eating away debt while increasing the value of assets.
Best For: Buy and hold investors seeking long-term growth; building wealth for retirement.
Real estate investors can enjoy higher annual income from rising rents due, in large part, to inflation. It’s like getting an automatic pay raise every year. Additionally, history has shown that home values have consistently increased along with inflation and even exceeded it. In many areas around the country, homes will appreciate 1.5 times faster or more than the rate of inflation.
Interested in learning more about investing in rental properties? Or want to become an investor yourself? Visit our sister website that specializes in real estate investing to learn how.
Just like other types of investments, real estate comes with its own set of risks. The housing market can fluctuate. We experienced the harshness of a fluctuating housing market during the Great Recession of 2008, where foreclosure rates skyrocketed due to a number of factors I won’t get into.
On the other hand, real estate investors who choose to invest in strong, growing markets, often overlooked for the glitz and glam of big market cities, minimize their risk exponentially. Although buying a rental property requires more cash upfront, you won’t lose your entire investment because it’s a physical asset with (hopefully) appreciating value. This helps make real estate a relatively low risk, high return investment. Keeping a property in your portfolio long-term can continually generate more and more passive income each year.
Owning rental property is one of the least liquid investments out there as you’ll have to sell in order to recoup your cash.
Investor Tip: You need to decide if you want to manage the rental property yourself or hire a management company. The good news is, most expenses related to a rental property manager are tax deductible.
