16) Investing During Extreme Inflation
With inflation on the rise and recent blows to the stock market, the topic of safe investing during these times is currently a common thought. Real estate investment is an effective way to diversify and break into a stable market. If liquidity is not of significant concern, there are plenty of opportunities for each individual, depending on their preferences. The fundamental types of real estate investing include commercial, industrial, residential, and land, with pros and cons for each. As an investor, you must decide whether you want to be a passive or active investor; this usually depends on your personal preferences or time restraints. However, when considering this in a recession, lenders will be weary of inexperienced investors and placing capital in private equity deals will be much more feasible when times are tough.
Real estate investing, particularly rental properties, has been known to be a relatively recession-resistant industry. Part of it is due to the fact that housing will always be an essential commodity during tough times, especially now more than ever, with recent generations renting more and more each year. Another reason this industry proves to be resistant is that investors can hedge their investment with an increase in inflation, which will result in higher cash flows for their properties. Investors are able to do this as when inflation is on the rise, it typically leads to an increase in rent. This is evident as the largest metro areas in the U.S. have seen a considerable spike in increase of rent in comparison to years prior. This lends itself to being particularly favorable for those looking to invest during a time when most people do not see opportunity.
Taking advantage of inflation rather than being idle is the difference between riding on top or drowning in it. Real estate investing has become a viable option for many looking to create wealth independently. Being able to hedge against inflation instead of fearing it can bring stability to those who are looking for increased financial security. By maneuvering this market with caution and selectivity, many investors have been able to safely invest and diversify with great success.
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