Rent Growth Vrs Hyper Inflation

[Joe Huber]

We just purchased an 89 unit property in Jacksonville, Florida. The JAX market is pretty crazy and Costar is projecting 15-25% rent growth for 6 quarters straight. For comparison, we budgeted 3% annual rent growth. I am obviously stoked about this deal but also concerned about the long term implications for the economy as a whole. Is anyone else concerned about hyper inflation? What are you doing as a hedge?

[Bruce Woodruff]

Originally posted by @James Kojo:

@Joe Huber

Co-star data isn't perfect, and all datasets are subject to outlier effects, so I wouldn't put too much stock in the actual 15-25% number as much as the directionality. For example, 3 consecutive  quarters of 25% would mean that it roughly doubles in 9 months, assuming those %'s aren't annualized. That might be possible in tiny sub-markets, but doesn't sound likely for a larger market like JAX.

Anyways, that's not to say inflation is not an issue. The best short position you can take against the dollar is to borrow money at a fixed interest rate, and use the money to buy income producing assets. In other words, do what you're doing. :)

Rents will likely track with overall consumer inflation, but you mortgage payments are fixed, so the more inflation, the bigger your profit margin.

Interesting times, for sure.

Yes, don't fear the bogeyman inflation, use it to make your life better.

A good metaphor for life perhaps....?

On a non-RE note, take a look at what you use on a daily basis that is important to you and yours. Stock up now if that makes sense.....