Hedge Against Inflation With These 3 Real Estate Investment Types

The annual inflation rate in the United States is currently around 7.5%—the highest it has been since 1982. It doesn’t matter if you’re a cashier, lawyer, plumber, or retiree; if you spend U.S. dollars, inflation impacts you.  Economists expect the effects of inflation, like a higher cost of goods, to continue. Luckily, an investment in real estate can ease some of the financial strain.  Here’s what you need to know about inflation, how it impacts you, and how an investment in real estate can help. WHAT IS INFLATION AND HOW DOES IT IMPACT ME? Inflation is a decline in the value of money. When the rate of inflation rises, prices for goods and services go up. Therefore, a dollar buys you a little bit less with every passing day. The consumer price index, or CPI, is a standard measure of inflation. Based on the latest CPI data, prices increased 7.5% from January 2021 to January 2022. A little bit of inflation is considered healthy for the economy, but 7.5% in a single year is high.  How does inflation affect your life? Here are a few of the negative impacts: Decreased Purchasing PowerWe touched on this already, but as prices rise, your dollar won’t stretch as far as it used to. That means you’ll be able to purchase fewer goods and services with a limited budget. Increased Borrowing CostsIn an effort to curb inflation, the Federal Reserve is expected to raise the federal funds rate. Therefore, consumers are likely to pay a higher interest rate on new mortgages, car loans, and variable-rate credit cards. Lower Standard of Living Wage growth tends to lag behind price increases. According to Moody Analytics, when adjusted for inflation, average weekly earnings in January were down 3.1% from a year earlier. As such, life is becoming less affordable for everyone. Inflation can force those on a fixed income, like retirees, to make lifestyle changes and prioritize essentials. Eroded Savings If you store all your savings in a bank account, inflation is even more damaging. As of February 2022, the national average interest rate for a savings account is 0.06%, not nearly enough to keep up with inflation. And economists don’t expect that rate to go much higher. One of the best ways to mitigate these effects is to find a place to invest your money other than the bank. Even though interest rates are expected to rise, they’re unlikely to get high enough to beat inflation. If you hoard cash, the value of your money will decrease every year and more rapidly in years with elevated inflation. REAL ESTATE: A PROVEN HEDGE AGAINST INFLATION So where is a good place to invest your money to protect (hedge) against the impacts of inflation? There are several investment vehicles that financial advisors traditionally recommend, including: StocksSome people invest in stocks as their primary inflation hedge. However, the stock market can become volatile during inflationary times, as we’ve seen in recent months. CommoditiesCommodities are tangible assets, like oil, livestock, and minerals. The theory is that the price of commodities should climb alongside inflation. But the classic choice–gold–hasn’t risen consistently during periods of inflation since the 1970s, according to data from Morningstar Direct. Inflation-Indexed BondTreasury inflation-protected securities, or TIPS, are U.S. government-issued bonds that are indexed to the inflation rate. Bonds are considered low risk, but the returns they offer are generally low, as well. Real EstateReal estate prices across the board tend to rise along with inflation and often rise faster than inflation. That’s one of the reasons demand for real estate is soaring right now. We believe real estate is the best hedge against inflation. Owning real estate does more than protect your wealth—it can actually make you money. For example, home prices rose nearly 17% from 2020 to 2021, 10% ahead of the 7% inflation that occurred in the same timeframe. Plus, certain types of real estate investments can help you generate a stream of passive income. In the past year, property owners didn’t just avoid the erosion of purchasing power caused by inflation; they got ahead.  TYPES OF REAL ESTATE INVESTMENTS Though there are myriad ways to invest in real estate, there are three basic investment types that we recommend for beginner and intermediate investors. Remember that we can help you determine which options are best for your financial goals and budget.  Primary Residence If you own your home, you’re already ahead. The advantages of homeownership become even more apparent in inflationary times. As inflation raises prices throughout the economy, the value of your home is likely to go up concurrently. At the same time, you’ve locked in a set mortgage payment for the next 30 years, so you’ll be immune to rising rental costs. If you don’t already own your primary residence, homeownership is a worthwhile goal to pursue. Though the task of saving enough for a down payment may seem daunting, there are several strategies that can make homeownership easier to achieve. If you’re not sure how to get started with the home buying process, contact us. Our team can help you find the strategy and property that fits your needs and budget. Whether you already own a primary residence or are still renting, now is a good time to also start thinking about an investment property. The types of investment properties you’ll buy as a solo investor generally fall into two categories: long-term rentals and short-term rentals.  Long Term Rentals A long-term or traditional rental is a dwelling that’s leased out for an extended period. An example of this is a single-family home where a tenant signs a one-year lease and brings all their own furniture. Long-term rentals are a form of housing. For most tenants, the rental serves as their primary residence, which means it’s a necessary expense. This unique quality of long-term rentals can help to provide stable returns in uncertain times, especially when we have high inflation. To invest in a long-term rental, you’ll need to budget for maintenance, repairs, property taxes, and insurance. You’ll also need to have a plan for managing the property. But a well-chosen investment property should pay for itself through rental income, and you’ll benefit from appreciation as the property rises in value. We can help you find an ideal long-term rental property to suit your budget and investment goals. Reach out to talk about your needs and our local market opportunities. Short Term Rentals Short-term or vacation rentals function more like hotels in that they offer temporary accommodations. A short-term rental is defined as a residential dwelling that is rented for 30 days or less. The furniture and other amenities are provided by the property owner, and today many short-term rentals are listed on websites like Airbnb and Vrbo. A short-term rental can potentially earn you a higher return than a long-term rental, but this comes at the cost of daily, hands-on management. With a short-term rental, you’re not just entering the real estate business; you’re entering the hospitality business, too.  Done right, short-term rentals can be both a hedge against inflation and a profitable source of income. As a bonus, when the home isn’t being rented you have an affordable vacation spot for yourself and your family! Contact us today if you’re interested in exploring options in either the long-term or short-term rental market. Mortgage rates are expected to rise, so you’ll want to act fast to maximize your investment return. WE’RE INVESTED IN HELPING YOU Inflation is a fact of life in the U.S. economy. Luckily, you can prepare for inflation with a carefully managed investment portfolio that includes real estate. Owning a primary residence or investing in a short-term or long-term rental will help you both mitigate the effects of inflation and grow your net worth, which makes it a strategic move in our current financial environment. If you’re ready to invest in real estate to build wealth and protect yourself from rising inflation, contact us. Our team can help you find a primary residence or investment property that meets your financial goals. 

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Your Home Decor Style Based On Your Love Language

There are a variety of different home interior styles and themes. From shabby chic to modern flair, or even oversized couches, there are unique items and styles that make a house feel like home.Our personality and natural tendencies can influence how we design our homes. How we love and who we are affects the way we design our spaces and interact with those around us—even if we don't realize it.Curious to know how your love language influences your decor and styling preferences? Read on. Quality Time For peple whose love language is quality time, you value a cozy environment where you and your loved ones can bond in comfort. A home should have spaces where you can cozy up with a loved one and watch a movie, settle down for a date or family dinner, or sit side-by-side and work on a project. Your home décor style is relaxed but not too casual that it’s a sloppy mismatch. You prioritize connections with others—specifically intentional time with them—so you value rooms where special moments can easily be captured. This may be movie corners, large couches, or cozy pillows on the bed. You also understand the importance of creating a space that can be enjoyed by friends and family members. You often capture the best moments with your loved ones and display them around the house or invest in stools to ensure there is always enough seating at your kitchen table. For you, spending time with loved ones means creating spaces that prioritize socialization. Acts of Service If your love language is Acts of Service, you are interested in designing your home in a way that satisfies the needs of every person living there. For example, having a garage workshop for your husband or painting shed for your roommate. You like to give to others and the design of your home is no exception. You see your shared living space—and the intention behind it—as an act of love and make sure you prioritize the needs of those who will live there. Words of Affirmation As someone who loves Words of Affirmation, it's no surprise that you decorate with quotes and poems. You like when your home décor inspires, engages, or encourages deep feelings. Consequently, there are words all over your walls, doors, and other surfaces. You also design your physical spaces to be conducive to deep talks and conversation. For example, all the couches and sofa chairs face inwards so people can sit and talk. The kitchen counter has a seating area for someone who wants to talk to the person doing the food preparation. Physical Touch When it comes to home décor, someone whose love language is Physical Touch will be all about the tactile. This means you may prefer a variety of textures that are comforting such as furry or fuzzy items, and areas that encourage sharing of blankets, seating areas, or even food. You love to be close to others. You want to hug, snuggle, and share with them. You even enjoy the small things like squeezing someone's shoulder while telling a story. Your home is decorated in these elements, and anyone who walks into your space will feel at home. Gifts If your love language is Gifts, your style is a collection of special items from other important people in your life. You may have a special piece of furniture gifted from a relative or mementos from other loved ones. Your space is a compilation of the things that mean something to you. Your space has a natural hodge-podge of moments and items that hold value to you. 

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9 Tips for Buying and Selling Your Home at the Same Time

Selling your home when you still need to shop for a new one can feel daunting to even the most seasoned homeowner––especially when the demand for new homes keeps rising, but the supply feels like it's dwindling.¹ You're not alone either if you're already feeling drained by the complex logistics of trying to sell and buy a new home all at once.  Searching for a new home can be exciting, but many homebuyers admit that it can also be stressful, especially if you live in an unpredictable market with plenty of competitors. Unfortunately, waiting out a competitive housing market isn’t always the best idea either since listings are expected to remain limited in the most coveted neighborhoods for some time.² That doesn't mean, though, that you should just throw up your hands and give up on moving altogether. In fact, as a current homeowner, you could be in a better position than most to capitalize on a seller’s market and make a smooth transition from your old home to a new one.  We can help you prepare for the road ahead and answer any questions you have about the real estate market. For example, here are some of the most frequent concerns we hear from clients who are trying to buy and sell at the same time. “WHAT WILL I DO IF I SELL MY HOUSE BEFORE I CAN BUY A NEW ONE?” This is an understandable concern for many sellers since the competitive real estate market makes it tough to plan ahead and predict when you'll be able to move into your next home. But chances are, you will still have plenty of options if you do sell your home quickly. It may just take some creativity and compromise.  Here are some ideas to make sure you're in the best possible position when you decide to list your home: Tip #1: Flex your muscles as a seller.  In a competitive market, buyers may be willing to make significant concessions in order to get the home they want. In some cases, a buyer may agree to a rent-back clause that allows the seller to continue living in the home after closing for a set period of time and negotiated fee.  This can be a great option for sellers who need to tap into their home equity for a downpayment or who aren’t logistically ready to move into their next home. However, many lenders limit the duration of a rent-back to 60 days, and there are liability issues to consider before entering into an agreement. A contract and security deposit should be in place in case of any property damage or unexpected repairs that may be needed during the rent-back period.³  Tip #2: Open your mind to short-term housing options.  While it can be a hassle to move out of your old home before you’re ready to move into your new one, it’s a common scenario. If you’re lucky enough to have family or generous friends who offer to take you in, that may be ideal. If not, you’ll need to find temporary housing. Check out furnished apartments, vacation rentals and month-to-month leases. If space is an issue, consider putting some of your furniture and possessions in storage.  You may even find that a short-term rental arrangement can offer you an opportunity to get to know your new neighborhood better—and lead to a more informed decision about your upcoming purchase. Tip #3: Embrace the idea of selling now and buying later. Instead of stressing about timing your home sale and purchase perfectly, consider making a plan to focus on one at a time. Selling before you’re ready to buy your next home can offer a lot of advantages.  For one, you’ll have cash on hand from the sale of your current home. This will put you in a much better position when it comes to buying your next home. From budgeting to mortgage approval to submitting a competitive offer, cash is king. And by focusing on one step at a time, you can alleviate some of the pressure and uncertainty. “WHAT IF I GET STUCK WITH TWO MORTGAGES AT THE SAME TIME?” This is one of the most common concerns that we hear from buyers who are selling a home while shopping for a new one, and it’s realistic to expect at least some overlap in mortgages. To make sure you don't get into a situation where you are carrying dual mortgages for longer than you can afford, examine your budget and calculate the maximum number of months you can afford to pay both.⁴ If you simply can’t afford to carry both mortgages at once, then selling before you buy may be your best option. (See Tip #3 above.) But if you have some flexibility in your budget, it is possible to manage both a home sale and purchase simultaneously. Here are some steps you can take to help streamline the process: Tip #4: As you get ready to sell, simplify.  You can condense your sales timeline if you only focus on the home renovations and tasks that matter most for selling your home quickly. For example, clean and declutter all of your common areas, refresh your outdoor paint and curb appeal, and fix any outstanding maintenance issues as quickly as possible.  But don't drain unnecessary time and money into pricey renovations and major home projects that could quickly bog you down for an unpredictable amount of time. We can advise you on the repairs and upgrades that are worth your time and investment. Tip #5: Prep your paperwork.  You'll also save valuable time by filing as much paperwork as possible early in the process. For example, if you know you'll need a mortgage to buy your next home, get pre-approved right away so that you can shorten the amount of time it takes to process your loan.  Similarly, set your home sale up for a fast and smooth transition by pulling together any relevant documentation about your current home, including appliance warranties, renovation permits, and repair records. That way, you're ready to provide quick answers to buyers' questions should they arise. Tip #6: Ask us about other contingencies that can be included in your contracts.  Part of our job as agents is to negotiate on your behalf and help you win favorable terms. For example, it’s possible to add a contingency to your purchase offer that lets you cancel the contract if you haven't sold your previous home.  This tactic could backfire, though, if you're competing with other buyers. We can discuss the pros and cons of these types of tactics and what’s realistic given the current market dynamics. “WHAT IF I MESS UP MY TIMING OR BURN OUT FROM ALL THE STRESS?”  When you're in the pressure cooker of a home sale or have been shopping for a home for a while in a competitive market, it's easy to get carried away by stress and emotions. To make sure you're in the right headspace for your homebuying and selling journey, take the time to slow down, breathe and delegate as much as possible. In addition: Tip #7: Relax and accept that compromise is inevitable Rather than worry about getting every detail right with your housing search and home sale, trust that things will work out eventually––even if it doesn't look like your Plan A or even your Plan B or Plan C. Perfecting every detail with your home decor or timing your home sale perfectly isn't necessary for a successful home sale and compromise will almost always be necessary. Luckily, if you've got a good team of professionals, you can relax knowing that others have your back and are monitoring the details behind the scenes. Tip #8: Don't worry too much if your path is straying from convention Remember that rules-of-thumb and home-buying trends are just that: they are estimates, not facts. So if your home search or sale isn't going exactly like your neighbor’s, it doesn't mean that you are doomed to fail.  It's possible, for example, that seasonality trends may affect sales in your neighborhood. So a delayed sale in the summer or fall could affect your journey––but not necessarily. According to the National Association of Realtors, the housing market tends to be more competitive during the summer and less competitive during the winter.⁵ But it's not a hard and fast rule, and every real estate transaction is different. That's why it's important to talk to a local agent about your specific situation. Tip #9: Enlist help early. Which leads us to our final tip: If possible, call us early in the process. We'll not only provide you with key guidance on what you should do ahead of time to prepare your current home for sale, we'll also help you narrow down your list of must-haves and wants for your next one. That way, you'll be prepared to act quickly and confidently when it’s time to list your house or make an offer on a new one. It's our job to guide you and advocate on your behalf. So don't be afraid to lean on us throughout the process. We’re here to ease your burden and make your move as seamless and stress-free as possible. BOTTOMLINE: COLLABORATE WITH A REAL ESTATE PROFESSIONAL TO GET TAILORED ADVICE THAT WORKS FOR YOU Buying and selling a home at the same time is challenging. But it doesn't have to be a nightmare, and it can even be fun. The key is to educate yourself about the market and prepare yourself for multiple scenarios. One of the best and easiest ways to do so is to partner with a knowledgeable and trustworthy agent.  A good agent will not only help you evaluate your situation, we will also provide you with honest and individually tailored advice that addresses your unique needs and challenges. Depending on your circumstances, now may be a great time to sell your home and buy a new one. But a thorough assessment may instead show you that you're better off pausing your search for a while longer.  We at the Connie Colla Group at RETSY are a local Arizona business and we care about our community and are dedicated to bringing you the important news and information as it happens.  Please reach out to us anytime if you have questions about this story or about buying or selling your home here in the Valley.  We Open Doors In Arizona Jeff Hernandez, Esq., Realtor  | 602-550-1114 | Jeff@ConnieCollaGroup.com  Connie Colla, Realtor  | 480-599-5058 | Connie@ConnieCollaGroup.com | ConnieCollaGroup.com  The Connie Colla Group | RETSY | Forbes Global Properties

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