Buying Real Estate as a Hedge Against Inflation – Naples, Florida

What is inflation?

• The investment you make in real estate provides income. Contrary to the volatility of stock market investments, you are collecting rent every month. In our area, you can expect a positive cash flow after all of your expenses of carrying a property.
• You are not only collecting real income but you are enjoying appreciation along the way.
• Even if you borrow money to purchase an investment property and have a monthly mortgage payment, you are gaining equity which means that you lower the loan-to-value of any mortgage debt as home prices rise over time.
• Even as inflation affects other costs and the price of things increases (energy costs to cool a house or heat a pool, as an example), you can adjust your rent to compensate those increases in carrying costs.
• In the case of an annual rental, the tenant is paying utilities, regular monthly costs and providing all of the furnishings. The owner would be paying real estate taxes, insurance and any mortgage payment only. The supply of annual rentals in Naples is painfully low with no relief in site so monthly lease rates are high.
• In the case of a seasonal vacation rental, our demand in the Naples area far exceeds the supply. With short term vacation rentals, you have the opportunity to spin on a dime and adjust rates up or down to take advantage of seasonal ebbs and flows to make sure that your occupancy percentage remains high.
• Although we experience real estate cycles, property values improve over time. See the graph below showing economic inflation next to appreciation across the nation for the past seven decades. Your real estate appreciation surpasses the inflation rate.

• Overall, property values can be relied upon to steadily increase over time. In fact, the median sales price of houses sold in the U.S. has increased over 350% since 1990. This consistent growth makes building equity through homeownership a dependable way to create wealth.
• If you purchase a home with a fixed rate mortgage, your monthly payment is based on the value of the dollar at the time of purchase. As you make payments over the years, you are paying with cheaper dollars as inflation rises.

Real estate is a time-honored inflation hedge. It’s a tangible asset and those tend to hold their value when inflation reigns, unlike paper assets. More specifically, as prices rise, so do property values, and so does the amount an owner can charge for rent, so that the property earns higher rental income over time.

Serious buyer? We listen well and will find your own “Piece of Paradise” at the best negotiated price and terms. We are full-time professional Realtors who depend on your referrals and take pride in our work. We have lived and worked through all real estate cycles. Take advantage of our skill and strategy to make you a successful buyer in a challenging market.