Los Angeles Real Estate Investors say, inflation, which is defined as the financial de-valuation of one’s money, can sound just similar to something many investors don’t want to hear.
Consequences of Inflation – Los Angeles Real Estate Investors
Los Angeles Real Estate Investors say, while its consequences are simple — a rise in the cost of products and services– it is also comprised of many less noticeable negative aspects as well.
For example, the direct effect that it has in the housing market (which includes impacting the many financial aspects included with buying an investment home).
Below, we describe these outcomes in comprehensive detail and offer a solution which will allow investors an opportunity to avoid the consequences of an inevitable rise in the inflation rate.
Increase in Cost of Home Construction
Assessing that inflation refers to a rising cost in the price of everyday goods, think of all the materials it takes to usually construct a new home.
Every thing from concrete and bricks, to drywall and stucco, inflation means that all of these required materials just became expensive for home builders.
Rising Home Prices
Los Angeles Real Estate Investors say, consider the effect of higher homebuilding expenses.
As they put a bigger financial burden on homebuilders, they have a small amount of refuge but to then make up for it using higher listing prices for just-built properties.
Unfortunately, this is not the only real reason inflation causes home prices to go up.
When the Central Bank increases the amount of money in circulation, house prices automatically increase as well.
Decline In Financed Home Purchases
In addition, another effect inflation has on the housing market involves borrowed money.
When inflation rises, causing money to eventually become more expensive to invest, people do not want to invest as much of itor may well not really borrow any at all.
This ends in a chain-reaction of far less fewer financed home purchases, which may flatten economical growth.
Why You Need a Hedge Against Inflation
With inflation steadily growing, now is an ideal time for you to take a position in an asset class that can provide a hedge against it.
By doing so, you are guarding your portfolio having a smart and strategic investment expected to maintain or increase its value over a specified period of time.
In fact, residential rental homes even often increase in value during days of on-going inflation.
For more information on real estate investing tips, fix and flip advice, real estate wholesaling education, real estate investor training and much more, make sure to follow our blog at: http://fortuneweavers.com/blog/