Catastrophic inflation scenario

[Kar Sun]

Hello all,

How do you write that into your contract.

Let's say you wake up and now instead of paying $10 for lunch it costs you $100 or $1000. Want to make sure that the contract will be adjusted to appropriately. We cannot control the politics but I sure do not want to be renting to receive monthly payment worth 2 lunches. Thoughts?

[Greg Scott]

First of all, if you are using fixed rate debt, you are almost assured to come on top if inflation goes up, even a little bit.

You can also protect yourself by not signing long-term leases.  Inflation takes a while to creep up.  It doesn't shoot to 1000% tomorrow from 4% today.  Keep your leases to 1 year or less and you will be fine, especially if you have fixed rate debt.

Real estate (with debt) is a great inflation hedge.