Many of you have asked me if I’m worried about inflation. Yes, I am, kind of.
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Here’s the deal – when there’s inflation you want to be invested in hard assets. Quality hard assets – like gold. They tend to weather the inflationary storm pretty well. But they may not provide current cash flow – or you may need to sell when they’re down. That would be painful. The catch is owning cash flowing hard assets that aren’t over-leveraged. They weather the storm and come out looking great! That sounds a lot like Multifamily! And there’s a massive shortage in housing so we’ve got two things going for us. If inflation kicks in, the cost of construction gets higher, which continues to put a lid on new development.
I’m more concerned about jobs and wage growth. If wage growth can’t keep up with rent growth, the affordability crisis, at some point, becomes a rent crisis. I don’t think we’re there at a scale that would cause fundamental issues, but I would like to see some sustained wage growth in excess of inflation – and we really need to see the bulk of this growth at the lower to mid end of the scale. These are our renters. Chairman Powell, thankfully, has also stated this as one of his top goals. And, of course, multifamily is driven by jobs so clearly we need the economy to continue to grow and thrive in general with positive job creation. Based on past actions that the Fed and Congress have taken, I highly doubt they will do something to ruin this. Bad tax policy, COULD, so we have to keep a close eye on that. Businesses MUST continue to be incentivized to invest and grow!
With that backdrop, we continue to believe multifamily is a great investment. Obviously the experience of your sponsor/operator is paramount, but the fundamentals continue to look solid. Invest responsibly. Invest often.
If you would like to learn more about Multifamily Real Estate and how to invest, please email me directly at James@jcoreinvestments.com