Inflation vs the lender/borrower

[TheHammer]

Just a question but why would you pour liquidity into things that will lose value in a rising interest rate environment? Sure inflation is eating up a dollars value in the short term but sitting on a bunch of cash right now would position yourself to be able to acquire more assets once the prices crash. If interest rates go up to 7% as an example no one would be able to afford the home prices that are out there right now. I would say get liquid and wait for deals in the near future.

In no 10 year span has any form of real estate went down over the course of the whole 10 year cycle. It may dip but you just have to hold a little longer. I promise, money in something in real estate will grow with inflation, better than money sitting on the sidelines in a saving account.

[ram04]

That the only thing that is throwing a kink in my thinking is what y’all are saying is our supply is low for sure and big business and hedge funds buying up real estate with cash no matter the price as well as people coming from other states but I just can’t imagine some price decrease if interest rates rise significantly. Inflation is pretty hot right now which would cause a significant interest rate hike.

[Dusty Britches]

I would think the worst thing you can do is have debt during hyperinflation. Your cash flow will be locked up in debt payments then how are you going to make daily and monthly purchases for necessities?

But maybe there is good debt to have during inflationary times and there is bad debt, like credit card or unsecured debt.

[PlanoDano]

It’s a catch 22, do you buy now while prices are still high because of low inventory, with the low interest rates or because you have cash on hand, which by the way is loosing value if you have it just sitting around because of inflation. Or do you “keep your powder dry” by hanging on to devaluing cash and wait for another major market downturn to be a buyer when people start trying to dump assets and get them cheaper at which time your dollar will be worth less and more than likely long term interest rates will be a lot higher.

It’s a gamble either way…


(I can write a run on sentence like no one else)

Answer on this is easy for me. In my life I can remember periods of high inflation (I think between 7 and 10) since 1970 and lots of years with moderate in inflation and a few periods of recession. I have only seen 1 period of actual deflation (2008-2009). I am talking more with property prices since that is the question. I have sold a few in this bubble and will probably look to re-invest before interest rates start going up. Here is a link to graph of average home price. I only felt the one price drop but the chart shows 3. And as the chart show I have never seen a bump like we are experiencing.


https://fred.stlouisfed.org/series/MSPUS

[gingib]

All these prices in Texas are “inflated” based on what we are used to. However, they are still are bargains compared to California, Colorado, NE States, etc…. And all of those people are flocking to our state. So it’s possible that our great state of Texas will no longer be a “bargain” and it’s the time to get in before it’s out of sight like the other areas I mentioned.


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This is the issue! I see it daily. Sad

[KactusKiller]

Just my opinion but if you worried a lot about your daily expenses and making your check stretch paycheck to paycheck you don’t need to be investing in significant real estate transactions anyway.

[gingib]

If you can hold the note buy the land. Only you know how much money you really have and how tight things would get if you run outta work.

This whole "debt free" mirage is what keeps a lot of folks broke. If you woke up this morning you owe money. It's called taxes. Taxes on breathing and taxes on everything you own from land, cars, etc.

So, if I am you I am looking at my stack, looking at my job/skillset, and looking at what that land could be/should be worth in 10-15 years.

Good luck.

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This whole debt thing is what keeps MORE people broke

[Snacks]

If you truly believe that true hyperinflation is coming, then you would go out and buy as many real assets as possible. The more likely scenario is that we see inflation stay higher on a sustained basis but rollover from a rate of change perspective (stagflation).
Inflation can be great if you own real assets because they are appreciating against the currency. However, it is detrimental to those without assets as wages tend to be on a significant lag to inflation.

[Hogmauler]

Y’all came through again.

[Hogmauler]

Just my opinion but if you worried a lot about your daily expenses and making your check stretch paycheck to paycheck you don’t need to be investing in significant real estate transactions anyway.

It’s not so much worry as it is wanting to make an intelligent decision based on sound information. I am retired, and on Medicare, have savings, and am looking at this as a potential investment. However, It will take several years before any type of return can be realized. Bottom line is no one knows what’s gonna happen with Joe Biteme at the helm.

[BlackoutRam2500]

This whole debt thing is what keeps MORE people broke

There is good debt and bad debt. Real estate and investments is good debt because real estate appreciates over time. Still paying for a blu ray player you bought in 2013 on a credit card at 27% interest would be bad debt. Hopefully no one in this group is confused about that.

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[Hogmauler]

Well said Ram!

[bbqfan5909]

Tend to follow financing depreciable assets should only be done if said asset is making you money in return.

There is good debt and bad debt. Real estate and investments is good debt because real estate appreciates over time. Still paying for a blu ray player you bought in 2013 on a credit card at 27% interest would be bad debt. Hopefully no one in this group is confused about that.

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[RiverRat1]

It’s not so much worry as it is wanting to make an intelligent decision based on sound information. I am retired, and on Medicare, have savings, and am looking at this as a potential investment. However, It will take several years before any type of return can be realized. Bottom line is no one knows what’s gonna happen with Joe Biteme at the helm.

If you have the money and can get it at a decent price it's probably a good buy

If the payment will make you broke then not a good idea.

If you're on a fixed income just pretend everything doubled in price. Could you still make the land payment that stayed the same price?

[JBJTX81]

Yup. That’s the 10 million dollar question Rat. Seems like your darned if you do and darned if you don’t. You just can’t tell the future. So your losing value everywhere.

No your not. You win. Look back 30 yrs ago. Look back 20 years ago. Look back 10 years ago. What assets have "deflated" in value. Inflation will always be around. The rate at which it occurs will vary. Any time you can lock in a low interest fixed rate over a long term period. You will win...period.

How much was this 10 acre plot of land 30 yrs ago? How much is it worth today? How much will it be worth in 30 yrs?

If your rate is low and fixed your going to come out ahead 10 out of 10 times.