How Does Inflation Impact Real Estate Investments? It's Not What You Expect
What amount of cash flow can you expect from a $200,000 home when you put 20% down payment? This is a question that I was asked just recently by someone looking to invest in real estate. I would have answered this question differently, and with a different set of numbers just six months ago. Now, however, the prospect has changed significantly. Read on to know why, or watch this short video.
Recent changes in the economy and their impact.
The economy has seen some significant changes in recent times. I've said for a while that inflation is coming, and that turned out to be true! So this question about cash flow that an investor can expect from a $200,000 home and a 20% downpayment – it had a different answer just six months ago. At the time, you could get a nice new single-family home for $200,000, whereas now you would probably have to pay in the region of $260,000 for something comparable. Of course the numbers differ from market to market, state to state, but I'm giving you some ballpark figures here.
So six months ago, after you had made your mortgage and other payments, you would still be able to net a few hundred dollars from your rental income for a $260,000 home. Now however, interest rates have gone up too. So your 30-year fixed-rate loan is that much costlier. Now you can expect to just break even or make a small profit.
Why real estate investors need not worry.
However, it isn't all bad news. In fact, if you have been a smart real estate investor and bought single family, brand new homes, you are probably in the best position. Right now, people looking to rent, prefer single family homes over anything else. The home with a yard, extra space for a home office perhaps – that is the sort of thing people want. And since the demand is high, rental incomes are also on the rise. So right now, there is a shortage in the property market: more people looking to rent than there are houses available for rent.
And in the coming days, as rent incomes continue to go up, your outflow or your mortgage payments are going to remain the same. With the gift that is the 30-year fixed-rate loan, you're going to find it easier to repay your loan as time goes by, while your rental income will continue to rise. In my book, that is a great deal!
If you have a question about real estate investments, feel free to ask me about it. You can reach us at our Toll Free number(800) 324-3983 or at(415) 927-7504, or you can email us at email@example.com. Who knows, the next time you watch my real estate videos, I may well be answering the question you asked!
ICG uses single-family home investments, bought in advantageous locations and the best U.S. markets. We enable you to enjoy the clout that comes from purchasing a multitude of houses, even if you only buy one.
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