By Paul Branton, Director of Investor Services for Home Rental Services
One of my favorite Christmas movies is “A Charlie Brown Christmas.” I enjoy it for so many reasons… the first reason being how Charlie is completely frustrated with all the commercialism around him and asks “does anyone know what Christmas is all about” and his friend Linus goes about explaining to all of their friends the meaning of Christmas.
My second favorite part of the movie is where Lucy and Charlie are talking and Lucy admits that she never gets what she really wants for Christmas. In this clip she says: “I never get what I really want. I always get a lot of stupid toys or a bicycle or clothes or something like that.” To which Charlie asks: “What is it you want?” and Lucy replies: “Real Estate!” A kid wanting real estate more than the latest and greatest toy….. tell me that doesn’t make you smile and laugh!
Well, none of us would be laughing at Lucy today if she had gotten what she really wanted back in 1965!
As we keep reading about how bad inflation has been this past year and we continue to hear the word “unprecedented” being used over and over again… I think of this movie. I think about Charlie getting frustrated with the environment around him and I think about Lucy wanting to own real estate. They were both smart kids. Charlie was right to be frustrated and Lucy was right to want to own real estate.
While we can’t do much on a personal level to reduce inflation in the larger economy, we can certainly do things to reduce its impact on our personal finances. But how?
Take the Lucy approach. Buy Real Estate!
When concerned with what inflation is doing to your hard-earned dollars, you should begin to look for inflation-hedging investments. Instead of investments in the market with stocks, bonds and mutual funds, investments in income producing real estate can actually make inflation work for you.
For example, if you consider your investments in the market vs. inflation today, you are probably in the hole about 15-20% based on what the S&P 500 has done this past year. Alternatively, we have seen rental rates increase by as much as 25% AND property values by as much as 10-15% in this past year on properties we manage. So, if you have a fixed rate mortgage on your real estate investments, (and you should!) this bump in rental income will more than offset the impacts of inflation on your real estate investments. (inflationary impacts might be: increased taxes, insurance, repair costs etc.)
With the KC market beginning to see prices easing on available inventory, this is a great time to invest… especially before we see more rate hikes from the Fed next year.
On behalf of all of us here at HRS, we hope that like Charlie you experience the JOY of Christmas and like Lucy, you get what you really want for Christmas this year… even if it isn’t real estate. 🙂