Why Inflation Is Good
Is inflation going up? Is it going down?
Depending on who you ask, and when, the answer may seem as random as the flip of a coin. Although some investors in some asset classes are at risk if inflation goes up (or down), we’re seeing a win either way here at NRIA thanks to the assets we’re focused on building for our clients. We build assets that are inflation protected and yet pay out current high cash flows. Currently, NRIA investors are extended a higher than standard 10% monthly payout return from our real estate backed “Class A Buildings Fund”!
Economic Outlook
This year began strong with continued economic growth but also with increased speculation of a coming recession. Then we were hit with the Covid-19 pandemic and lockdown. The federal government responded with stimulus money which has altered the economic landscape so that we haven’t experienced the usual effects of the current recession, at least not to the degree that many had anticipated.
Instead, some economists are now concerned that as we recover from the effects of the pandemic, inflation will soar rapidly. In response, Barclays is advising, “Don’t believe the hype: High inflation is not just around the corner.” The country is reopening, people are getting back to work, but demand is recovering so slowly that only a modest rebound to inflation is expected. The reality is that 16.3 million people remain on unemployment benefits. The Fed is right to believe that it will take quite some time before we see inflation meeting their 2% target.
Founded in 2006, NRIA has grown to be one of the nation’s leading specialists in institutional-caliber private real estate investment management with over $1.25B AUM*, focusing on luxury townhome, condominium and multifamily acquisition and development in many supply constrained, high barrier- to-entry markets along the east coast.
We are seasoned experts in navigating financial nuances, we thrived in the last financial crisis and we are here to help you now. Get 10% monthly electronic cash flow– with total yields to 18-21% right now!
Why Low Inflation Is Good For The Right Portfolio
With so many people working from home, especially those with better jobs, there will be a rising demand for higher quality homes that provide better home office spaces. Zillow CEO Rich Barton says, “[COVID] and work-from-home policies are inspiring people to rethink their homes and consider moving.” Super-low mortgage rates and the tax benefit of writing off those home offices will move more people into the market for luxury multifamily residences. The Fed has already indicated that low inflation will keep interest rates low, giving us continued leverage to expand our holdings in this sector. NRIA has these very investments available to investors right now.
But What If Inflation Does Skyrocket?
Even if inflation soars, this is not bad news for investors who hold portfolios of multifamily and luxury residential diversified in a fund.
Rising inflation means raising annual renewal rents, and that means a higher return to our investors. As inflation rises, it pulls up the value of real estate with it, especially the Class-A multifamily investments that we build and sell for our investors. Class-A assets are inflation-hedged and protected investments for when inflation comes back. NRIA is building these right now.
Multifamily cashflow will rise with inflation but even if we don’t see inflation rise, and even if we see an economic decline, NRIA investors get the steady, predictable cashflow of a multifamily investment and don’t have to worry about the ups and downs of a volatile or declining stock market because large cash flow buildings are always desired by the Pension Funds, Retirement Asset Managers and Insurance Companies – our prime buyers!
By investing in an integrated real estate fund that is 84% multifamily you continue to receive positive cashflow from our on going income-producing building sales strategy while other investors worry whether they will recover their original investment.
Summary
Look, there’s a lot of competing news out there. And headlines about sky-high inflation or rock-bottom deflation can compel investors to make emotional choices in their investments. But if you do your due diligence and choose an investment that is strategically protected from high or low inflation, you erase the risk of acting emotionally and you build a portfolio that is prepared to weather the inflation direction in any economy.
*AUM as of Q1 2020 and consists of real estate assets owned, managed and current project costs.
