Though the full effect of the the U.S. Government’s new $700 billion bail-out bill are yet to be seen in the Boston real estate market, we can pretty much be sure of one thing…inflation. As I see it, the government can either raise taxes (unlikely in this election year), or simply print more greenbacks to fund the bail-out. Pumping new money into the economy will almost inevitably lead to high inflation levels. Retirement accounts and investment portfolios will yield less than the sky-high inflation, and then we will be in for some big trouble.
There is a way to hedge yourself against inflation; buy a property and rent it. Now I’m not saying buy a property you can’t afford. There are plenty of deals to be had, even foreclosures. Put at least 20 percent down and take out a 15 or 30 year-fixed loan. Your mortgage will be fixed but the rent certainly won’t. Rental prices will rise due to inflation, but more importantly, due to a higher demand. As more people face bad credit scores and higher down payment requirements for loans, less buyers will actually be able to purchase. Everyone needs a place to live, so demand for rentals will increase. This is not that “buy, hold and pray” or “flip” strategy that led so many people into financial ruin. This is the “real estate as a way to financial freedom” plan.