Economical Factors No Real Estate Agent Will Explain You: Part 1 - Inflation Rate

The set of articles should act as a guideline for current and future real estate investors and it will explain some basic fundamentals to follow, that no real estate agent explain you about. With every article I am coming back to market timing as the cornerstone for investment decision making. It is so important to grasp and apply whether investing for a first or multiple time. Do not believe in fairytales when agents or co workers say it is right time to buy real estate now; assess yourself relying on  following 7 vital factors, that are divided into nation and local levels:

Inflation rate -  The rate at which the general level of prices of goods and services is rising, and, subsequently, purchasing power is falling. Biggest enemy of your cash reserves, derivative of growing country's speculation extent.  

Inflation Rate 1% - 10%

Family Homes - This level of inflation has little influence on family homes. Market condition must be assessed further: Buy/Hold/Sell

Apartments - This level of inflation has little influence on apartments. Market condition must be assessed further: Buy/Hold/Sell

Raw Land - This level of inflation has little influence on Land. Market condition must be assessed further: Buy/Hold/Sell

Office - This level of inflation has little influence on office premises. Market condition must be assessed further: Buy/Hold/Sell

Retail - This level of inflation has little influence on retail premises Market condition must be assessed further: Buy/Hold/Sell

Inflation Rate 10%+

Family Homes - Buying this environment is risky as prices are inflated and lending institutions will require more collateral to protect themselves from inflation impact. Sales option better as max gains available at the peak. Hold/Sell

Apartments - Has negative effect in a short time. Depending of a lease review frequency you can adjust your rent charges to compensate inflated prices. Make sure you maintain your aimed ROI. Sell

Raw Land - Land has limited expenses not like other real estate; therefore effect will not be so damaging. Land appreciates in this phase. Hold/Sell

Office - Success against inflation lies with rent contract, where clause for price adjustments exists. Without clause it is hard to compensate increased costs and improve ROI. Hold/Sell

Retail - Like in Office scenario, hedging against inflation lies with lease context. Where 5year lease review occurs, new rent prices should include compensation for past losses. Hold/Sell

Inflation Rate < 0%

Family Homes - Deflation causes prices to decline as your profits too. Try to sell at the earliest indication. Sell

Apartments - Rent prices will decline as competition will increase. Decision to sell will depend on location and length of the lease. Sell

Raw Land - Land prices will fall but with slower rate than other real estate. Sell

Office - Benevolent depending on the contract. If tenant is locked in with 10 year rent review intervals, deflating prices will allow to increase ROI and time to sell. Hold/Sell

Retail - Can be benevolent depending on the contract. Usually it has damaging effects and must be sold with the earliest sense of deflation. Hold/Sell

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