Inflation: What Real Estate Investors Need to Know

Inflation: What Real Estate Investors Need to Know

Post pandemic you might have the future of our economy on your mind. What should you be thinking and doing in a high inflation environment? We gathered some statistics so you know exactly what the data currently looks like regarding inflation. In 2021 we had 4.7% inflation which isn’t really enough to feel it. Recently we have started to feel this inflation with gas and food prices because inflation has almost doubled. It is now at  8.3% which we haven’t seen since the 80’s. The food index has gone up to 9.4% in the last 12 months. What does this mean for you? We’re here to break it down. 

What exactly does inflation mean?

It means our money is losing power right now. Our dollar is worth less, our stock market values are going down and this causes us to feel differently about how and where we spend our money. The worst place to be right now is sitting on cash. When you are sitting on hard cash, the money is quite simply just going down in value as it sits there. It’s the opposite of earning interest, it’s losing value, 8.3% to be exact. But when you invest, your money has the opportunity to go up in value, especially if you invest in something that is necessary. 

Let me give you an example. You can have a productive asset or an unproductive asset. A productive asset is real estate, and an unproductive asset is gold and silver. Sometimes gold and silver does go up in times like this but you want an asset that can actively gain value and earn profit. Believe it or not, this is a great time to borrow money with a fixed rate and invest it into active or hard assets. 

Where should you invest? 

A hard asset backed with financial security is a solid investment in an inflationary environment. You can leverage the long term value of your money by getting a fixed rate mortgage. If you get a bank to finance a larger real estate purchase (the bank is your financial security), you have a place to park your money in an inflationary environment that will at minimum hold and most likely increase in value. 


Don’t pay private lenders higher rates even though you know inflation is driving costs. Your goal is to drive down your front end costs and decrease your back end costs to create margins. Get in the heads of your lenders, they are thinking ‘Because banks are increasing mortgage rates maybe I should increase mine too?’ Use that by telling them, ‘Listen the banks are going up and as a result I am going to use you more.’ Talk about it and use it, learn to speak the language of fixed rate returns and variable returns. 

How do I deal with the squeeze on my business? 

Businesses during this time can also be leveraged. How? You are being charged more for what it costs to run your business, especially in real estate. Look at the cost of lumber, building supplies, etc. The question is, can you charge YOUR customers more money? When you can’t charge your customers more money but everyone else is charging you more, you begin to feel your margins squeezed. 

How do you get around this? 

By investing in yourself massively. Become the person that people want to invest more money to work with, buy from, or learn from. Think about Apple, they just raised the prices of their phones by $200 and you probably didn’t even blink when you paid it. Look at what you offer and your customer base and get really discerning about what price you can justify charging based on the value you deliver. When you invest in yourself to be the best business owner you can be, people will start coming to you. 

Because of inflation, businesses will start shutting down, but if you are the best at what you do, you will stay in business and you will thrive. The top percentages of businesses will stay open and top the market. How can you become ‘the best’ at what you do? 

Spend your time and money investing in yourself to make more money. 

The bottom-line is this: look at the opportunities in real estate right now and find the best outlet for your money. And invest in yourself, so you can charge whatever you want now, and in the future. You will get your rates even in an inflationary environment because you will quite simply, be the best at what you do. For more data analysis on this topic, check out more of our free blogs and podcast content

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