How to Invest in Real Estate During Mega Inflation

It’s no secret that inflation is taking its toll on consumers across the country. The cost of everything from gas to groceries to utilities is higher than it has been in years, and Americans on a budget are feeling more pressured every day.

But it’s not just consumer goods that cost more. The real estate market has also been a victim of inflation.

Since the end of 2020, house prices have soared, largely due to a large imbalance between the supply of available homes and buyer demand. Interestingly, historically low mortgage rates were the catalyst for a surge in buyer demand from mid-2020 to early 2022. But since January, mortgage rates have risen sharply and, at At this point it has become relatively unaffordable to borrow.

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But buyers don’t seem to be backing down despite rising mortgage rates. And since the housing stock is still very low, house prices should remain high for some time.

This could be a problem if you are someone who was hoping to start investing in real estate this year. But in fact, you’re out of luck. This is because there are options you can consider outside of the housing market.

A more affordable way to get into real estate

Some people invest in real estate by buying houses and flipping them or renting them out, long or short term. But there is another option you can consider in the context of real estate investing: buying REITs.

REITs, or real estate investment trusts, are companies that make money by owning and operating different types of properties. While some REITs trade privately, many are public, so you can buy, sell, and track their stock prices the same way you can keep tabs on a particular stock.

The advantage of owning REITs is that you won’t be forced to pay the same premium as if you were to go out and buy a house in today’s market. In fact, due to the general turmoil in the stock markets, a number of REIT stocks are down right now, so you may have the opportunity to pick up some bargains.

Additionally, REITs offer investors two chances to make money. First, the value of your REIT shares could increase over time, although it is best to plan to hold your shares for a decade or more to really benefit from this growth.

Second, REITs are required to pay out 90% of their income to shareholders as dividends. So you might find that if you buy REITs, they pay higher dividends than most stocks you own (although that’s not always the case).

Don’t pay too much

In today’s economy, consumers may have no choice but to overpay for essentials like food and gasoline. But that doesn’t mean you have to spend too much on real estate. If you stock up on REITs instead of physical properties, you can build yourself a nice portfolio without having to lament the fact that you’re clearly paying a premium for an investment.

About Mary Moser

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