Depending on which economist you listen to or read you may be inclined to believe that the U.S. is headed towards inflation. The theory is that because the Fed and it's counterparts around the world have been printing money to combat the global recession, inflation is a natural consequence. If you agree with this argument, you may want to buy into real estate!
If you have a low-rate, 30-year, fixed mortgage, your note will appreciate as prices rise:
- Your property value will rise
- Your rental income will rise
- Your mortgage payment will remain fixed
- You will repay the loan with cheaper dollars
Among the top economists there is plenty of disagreement regarding inflation. Some argue that with unemployment figures at a 26 year peak and plenty of idle factory space, rising prices in the near term is not a concern.
Real estate investors need to remember however, that a hedge against inflation is just one of the many benefits of investing in real estate. And remember the tax advatanges to owning a home:
- Ability to depreciate real estate hence reducing (or eliminating) your
reportable taxable income from the property
- Ability to write off expenses
- The mortgage interest deduction
- The ability to sell real estate and either avoid and/or defer the payment
of capital gains taxes
Remember there is great value in today's market.
