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How Real Estate Performs pg. 16
But what if we’re headed for
another Great Depression? We
certainly hope that is not the case,
but let’s take a look at how real
estate performs in deflationary
times. If residential real estate
performs well in inflationary times
then you might expect that it
would not perform well as an
investment in times of deflation
but as we’ll see that is not the case.
In times of deflation, there isn’t
much money available to buy
anything. This lack of money creates
a lack of demand, and the lack of
demand forces prices down and
that includes real estate prices.
However, real estate has just gone
through a major deflationary period
while other commodities such as
gold, silver and oil have had major
upswings. So real estate has less
room to fall and less risk than
other commodities.
But here’s the kicker, cash flow
real estate has a huge advantage over
other assets during deflation: the
cash flow!
Even if the value of a rental
property drops during a period of
deflation, the rent checks still give
you a return on investment each
month. Other investments do not.
Plus, it’s easy to find renters
during deflation because banks
don’t have the money to lend for
18
mortgages. People can’t buy homes,
so they have to rent. If you expect
a period of deflation, your real
estate investment will perform
best with longer lease periods so
increase your lease durations as
much as possible.
In summary, you can see that
residential rental properties do
very well in times of inflation and
they have advantages over other
investments in times of deflation. ♦
P.S. – Our team of
experienced real estate
professionals can help you create a
customized investment plan and
find properties in the best rental
markets in the country that fit your
plan.
To reach Summit Assets Group,
please call: 4082689777.