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Inflation and its effect on Real Estate

A couple months ago I posed the following question during an office meeting:  “what effects will a higher than normal inflation environment have on Real Estate Investments in general and on our portfolio specifically?”  We came up with a few answers that fell into 2 categories: postive and negative. 

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On the positive side, by owning existing buildings, you are at an advantage vs. to-be-built buildings as they will cost more to build given the effect of inflation on construction materials.

On the negative side, if you are holding properties with long-term, flat leases, the dollars that you put in your pocket after paying the mortgage will be worth less each year though no less in absolute dollars. 

And as if Mark Heschmeyer was in the room with us that day, he wrote this_article.

"what effects will a higher than normal inflation environment have on Real Estate Investments in general and on our portfolio specifically?”

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by Suzanne Echols
07.24.2008