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Strategies to Benefit from Inflation

Strategies to Benefit from Inflation

The only “hedge” against inflation that we are aware of that works consistently over time, in any market, and any economy is real estate. Well bought real estate can stand the scrutiny of analyses, using historic or current data, by investing using borrowed money.

To be clear, the ability of real estate to provide a real hedge against inflation only works if you get a mortgage to acquire the property. If you use your own cash, then this capital will be ravaged by the same inflation, and in a similar manner, as if you had purchased anything else.

Although we argue strenuously that there are other benefits of investing in real estate. However, the greater the proportion of the purchase price that is funded using borrowed money, the greater the inflation-beating benefits to you.

And this is where we come to one of those great benefits of real estate that is easy to miss. Since real estate prices are subject to inflation, by borrowing the purchase price (or a large proportion of it) you can largely beat inflation, and real estate is also about the only asset class against which banks and financial institutions will let you borrow money in the first place. It’s a marriage made in heaven!

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