How to Hedge Inflation? By Real Estate.

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Leonard Steinberg recently put this list together of details to consider when investing - and the advantages of Real Estate.

Recently a report surfaced comparing the return on investment between real estate in Manhattan and the equities markets from around the 2008/9 financial crisis to today.  The returns from equities were significantly higher than real estate, but this report forgot to mention a few important details.

1. You cannot live in your Apple, Google, Home Depot or Walmart Stock. People have to live somewhere. There will always be a cost to shelter, whether owned or rented. Living in your investment is a value many omit as it delivers a return that is difficult to quantify.

2.  Most people are not great savers. Renters are often lured into spending on things that take away from investment money.  The forced savings element of ownership has a solid value to most.

3.  Why work? Why save? Many of the people we cater to are at the higher end of the markets. Their homes are in many ways a reward for success. They are a tangible reminder and direct result of their successes and privilege. They provide comfort and luxuries. They provide the environment to define their life's story of family, friends, and experiences. 

4.  Quality Real Estate, while often not a big money-maker, is an outstanding hedge against inflation. Over extended periods of time value is maintained (while mortgages are paid off) and often they increase in value too.

5.  Investment real estate has numerous tax advantages, including depreciation.

6.  Just like stocks, each individual purchase delivers different returns. I bought an apartment in 2009 that is now worth at least 60% more. It escalated in value not just because of inflation and rising markets: it is a beneficiary of factors such as neighborhood gentrification and value purchasing. Renovations and alterations can impact value growth significantly too.

7.  Not all stock have delivered exceptional returns over the past decade. Granted, a diversified portfolio has done well.  Yet some BLUE CHIP stocks have lost significant value.....think GE.