One of the many benefits of real estate, and especially multifamily properties, is that real estate is a hedge against inflation. Inflation causes costs of goods and services to increase, making them more expensive. How is real estate a hedge against inflation?
As inflation increases the cost of goods and services, market rents will typically increase. Higher rents create more rental income and more cash flow. Higher cash flow likely means higher profit for the property. The value of apartments is based on the Net Operating Income (NOI). NOI is income minus operating expenses.
When inflation hits and everything is more expensive, including rent, the impact is higher cash flow and a higher valuation of the property. Thus, real estate is a great hedge against inflation!
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