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  Inflation makes your money worth less than it was in the past. It eats into your savings, shrinks the real value of your income, and increases your cost of living. If you’re going to protect your wealth against its ravaging march, you’ll need to invest in assets, such as real estate, with a value that can significantly appreciate over time.
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One such asset is real estate. The value of certain kinds of property (located in specific places) has historically tracked or even outstripped inflation. However, not all real estate achieves this, so you’ll have to closely examine your options before investing in any of them. If you’d like to take advantage of the wealth protection that real property can afford you during inflationary periods, here are seven things you can do to move in that direction.

Choose A Good Location

Not all locations promise high returns on real estate investments. Some will consistently yield double-digit percentage profits. Others will barely record a change in value in years. Given this fact, it’s important that you investigate the property markets you’re interested in before staking any money on them. Go for areas with growing demand, districts that are marked for major developmental projects, and localities on the outskirts of expanding cities. These places are most likely to see their property prices rise substantially over time.

Consider The Type Of Property You’ll Invest In

Just as is the case with locations, you’ll get varying returns from different kinds of property. As a rule, luxury property tends to record a much higher increase in value during inflationary periods than houses built for middle and lower-income occupants. Residential real estate may see a dip in rental numbers when prices are climbing rapidly across the economy. But commercial real estate isn’t affected as much, because businesses remain functional in such times. Consider these factors when pondering what investments you’d like to make.
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Look For Undervalued Property

Believe it or not, a good number of properties are valued at less than they are really worth, even during high inflation periods. If you want to secure great returns on your investments, you should seek out properties like that. You may not be able to spot them yourself, especially if you don’t have extended exposure to the real estate valuation and deal-making processes. Get an experienced real estate agent, or even a valuer, to do this for you. An asset that’s undervalued provides you with a low base from which to fix your price or rates and make a great profit.

Pass On Inflationary Costs

You can invest in property that you can rent out to tenants. When you do so, you’ll be able to pass on the inflationary costs you incurred while purchasing or building the property to them. This is one benefit you enjoy from owning this type of asset.
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Be Ready For Higher Interest Rates

When inflation persists, authorities in charge of monetary policy will typically raise interest rates to try to control it. This is passed on by banks to borrowers, who have to pay higher interest for loans. You will also pay increased interest on the mortgage you take out—unless you have an alternative source of finance that isn’t as expensive.

Minimize Costs

Your real estate investment should be a hedge against inflation. But it’s also crucial that you spend the lowest amount of money possible on securing or building your asset, while not sacrificing quality. This lets you expand your scope for turning in a profit beyond merely tracking inflation.

Invest For The Long Term

In the end, you’re most likely to reap maximal returns on your real estate investments if you stay invested for the long term. The longer you hold your property, the higher its value will grow, and other factors held constant. In reality, the value of your property will almost certainly not climb at a uniform pace over time. If the market fundamentals remain solid, you may keep your real estate asset even if demand falls or stagnates in the short term.

Final Words

Real estate provides one of the best stores of wealth on earth and is a trusted buffer against inflation. But the safety that it promises isn’t always guaranteed. Investors should examine property options carefully and settle for one (or ones) that demonstrate a strong potential to beat inflationary trends over the period they choose to remain invested. Featured Image Source: Bungalow
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This article was first published on 17th November 2022 and updated on November 21st, 2022 at 7:34 pm


Ikenna Nwachukwu holds a bachelor's degree in Economics from the University of Nigeria, Nsukka. He loves to look at the world through multiple lenses- economic, political, religious and philosophical- and to write about what he observes in a witty, yet reflective style.

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