Owning Property is a Hedge Against Inflation

Most of us know that owning a home is a financial investment but it’s really a lot more than that. It’s deeper! A home is an anchor for emotional support. A home should be a safe place where one can relax and be themselves. It provides one of our most basic needs, which is shelter. It’s also a place for families, where children grow, and adults grow old. It’s a place for one to enhance personal well-being.

You may recall several weeks ago, I wrote about the 1992 movie “Far and Away” in which an Irish immigrant in the 1800s, came to America pursuing the dream of becoming a property owner. I also gave an example of that dream applying today to native born Americans. US Presidents have referred to home ownership as the “American Dream”. 19th century poet and thought leader, Ralph Waldo Emerson once said, “A house is built with walls and beams; a home is built with love and dreams”. Samuel Clemens, aka Mark Twain, was quoted in a serious yet humorous comment, ”Buy land, they aren’t making it anymore!”

All that being said, we still know that owning Real Estate is a solid financial investment. We hear people say that one is better off buying a home, rather than renting because when one rents, they’re paying their landlord’s mortgage. That’s true even though there are cases when renting makes sense, but that’s a topic for another day.

Given our current economy, I want to point out that owning property is probably your best hedge against inflation. These days, we’re spending more on gas, groceries, and practically any other consumer product. A renter can’t lower his or her rent, but a homeowner can reduce their mortgage debt by making the same payments each month. This equity leads to wealth building. In addition, a home, as long as it’s taken care of, is an asset which appreciates! Automobiles on the other hand, significantly depreciate the moment they’re driven off the lot. We need our vehicles, but they aren’t investments.

Equity is not the only way Real Estate financially benefits an owner. The Mortgage Tax Deduction is a tax incentive for homeowners which allows them to subtract mortgage interest from their taxable income. Then of course a way to truly accelerate one’s wealth via Real Estate is to purchase investment properties…in other words, flipping properties or purchasing and managing rental properties. Now keep in mind that managing rentals can come with a lot of headaches and flipping properties, is a lot more stressful and time consuming than how it’s portrayed on reality tv shows.

We live in a university community so there’s a strong demand for rentals, but we also have a strong employment base for a city the size of Morgantown. That’s created a strong demand for single family homes, town homes and even condos to a degree. As individuals, we can’t control inflation or other broad economic factors but what we can do is take advantage of a great hedge against inflation. Invest in Real Estate!