Inflation is a hot topic right now. You’ve probably heard the “i-word” more than you’d like lately, right? We know we have. It is uncertain how long this inflationary period will last, and how big of an impact it will have on the market as we know it. If you want to ensure inflation doesn’t have a negative impact on your investment portfolio, investing in real estate is the best thing you can do.
What is a Hedge?
As a hard asset, a real estate investment is considered a hedge. A hedge is a type of investment that helps protect against the decreasing purchase power of money during an inflationary period. This is an investment that isn’t subject to wild fluctuations and big market swings. Essentially, investing in real estate is a way to protect your finances from risky and/or unknown situations.
Why Real Estate Investing Works.
We’ve said it time and time again: real estate investing isn’t sexy. It’s not a get rich quick scheme. It’s a get rich slow scheme, but a get rich for sure scheme.
Real estate investing is recession resistant and downturn resistant. Here’s why:
Bear with us for a little lesson in math and economics. Imagine you have $1M to invest. You put that $1M in the stock market. Then, there’s 10% inflation. As a result, your investment loses 10% of its value. Alternatively, if you go buy a $1M property with a 90% loan, your down payment is $100k. When there’s 10% inflation, the property gains $100k in value, but the value of your debt does not change. You only invested $100k (the down payment), so you’ve actually doubled your money and made a 100% return, as opposed to that loss of value you’d experience in the stock market.
“Real estate investing is not a quick rich quick scheme. It’s a get rich slow scheme, but a get rich for sure scheme.”
— Black Swan Real Estate
With real estate investing, you are leveraging your debt that is frozen in time and does not go up with inflation. The Fed wants a minimum 2% inflation. Comparatively, the gold standard for real estate market appreciation is 3.4%. Because the value of your debt does not change while market appreciation continues to grow, you’re set up for success. You will do extraordinarily well in an inflationary period.
This is not to say that real estate investments are invincible. Real estate can lose value in an extreme negative situation, but because hard assets have a floor to their value, unlike something like cryptocurrency, they’re more recession resistant. It is significantly harder to lose your money when you invest in real estate.
Invest in Real Estate with Black Swan.
We recently launched Black Swan Fund II. This is our second game-changing private equity fund, with no fees, long term tax advantages, and 100% return of capital to LPs before any splits. We target an indefinite hold to benefit from cash flow, debt paydown, appreciation, and tax advantages. While most private equity funds have a required exit, our indefinite hold mitigates the #1 risk in real estate: illiquidity.
Watch the Black Swan Real Estate Fund II Launch to learn more about our track record and what we plan to achieve with this fund.
In May, we shared a detailed performance review of Fund I. See for yourself why our fund structure works.
Investing in real estate is one of the best ways to ensure inflation doesn’t have a negative impact on your portfolio. Remember, you should always use caution and consult your personal advisors prior to making any investment decision.
DISCLAIMER: This is not a solicitation to sell securities. Black Swan Real Estate Fund II is a Reg D 506(c) opportunity available to accredited investors only. Past investment performance is never a guarantee of future performance. Every investment opportunity performs differently and outcomes are never the same. Please consult your personal advisors prior to making any investment decision.