Inflation, Tariffs & Real Estate

Back in 2020, I was mid-development on a multifamily project when lumber prices spiked 4x seemingly overnight. That single cost line item turned what was supposed to be a predictable, well-underwritten deal into a scramble. We made the decision to bite the bullet and purchase materials at inflated prices—and it ended up being the right move.

That experience taught me something: if you’re in real estate, you need to be prepared for cost shocks. But it also helped me see clearly what kind of shocks are survivable—and which ones are truly dangerous.

And I’ll tell you right now, inflation and tariffs aren’t the enemy people think they are—especially if you’re investing wisely.

Inflation Isn’t Just a Threat—It’s a Feature (When You Use It Right)

A lot of newer investors worry about inflation. And sure, if you’re holding cash or relying on fixed income, inflation is brutal.
But when you own real estate with fixed-rate debt, inflation becomes a tailwind:

• Rents tend to rise

• Asset values increase

• Your debt becomes cheaper to repay in real dollars

I’ve seen this firsthand. Even when materials or insurance spike, the long-term value of the property typically rises faster—if you’ve bought at the right basis.

Tariffs Are a Nuisance—Not a Deal Killer

Yes, tariffs drive up costs on imported goods—especially things like steel, appliances, or lumber. But here’s the key insight:

If you’re investing in stabilized or light value-add properties, your exposure to material costs is minimal.

We’ve got properties in our portfolio where we did very little renovation, and the tariff impact is negligible. On the flip side, in one of our development deals, material costs jumped ~30%—which was a real hit. But even that was dwarfed by the interest rate increases that came later.

The Bigger Risk Is Operational Costs You Don’t Plan For

The two line items that have surprised us the most recently?
Property taxes and insurance.

• One property saw taxes go from $150K to $450K

• Another had insurance triple in under 24 months

Tariffs didn’t do that. And neither did inflation alone. What drove those costs up was a mix of legal environments (like in Florida), misaligned assessments, and under-the-radar market shifts.

This is why active management and tax appeal strategies matter.

Key Takeaways for Passive Investors

If you’re investing in syndications or funds, ask these questions:

• Is the operator underwriting future inflation in renovation budgets?

• Are taxes and insurance assumptions realistic?

• What’s the plan if interest rates don’t fall anytime soon?

Also—be cautious of sponsors who overreact to every market headline. You want steady hands at the wheel.

Final Thought

Inflation and tariffs aren’t something to panic over. I’ve seen worse, and I’ve learned that real estate—when bought well—tends to float in rising waters. That’s a big reason I stay focused on real assets, and why I continue to educate others about building wealth through passive investing.