Galloping inflation of our currency continues to make the news. Loss of purchasing power for the dollar surpassed 8% for over six months in 2022 and remains at nearly 5% today, compared to the long term average of 3% historically.

If you have money stashed in the bank, it’s getting less and less valuable. If you have “fixed-income” assets like bonds, those returns are worth less and less as the dollar gets less and less valuable.

Every investor has ample incentive to diversify out of those assets, which lose value as money becomes more plentiful and the cost of goods and labor skyrocket.

Multifamily real estate is one of many investment options that investors can acquire as a hedge against inflation. Why is this the case? How does inflation impact multifamily real estate?

Rising Rents

Inflation of the currency reduces its purchasing power — meaning goods and services cost more. One of the things that cost more tends to be rent.

The amount of rent an apartment complex can command is largely market-driven. That is, it depends on what other landlords of competitive nearby rental properties are charging. If other landlords near you are starting to charge more, that gives you leeway to charge more for renewals and new leases.

Of course, multifamily landlords are limited in how much they can charge based on how much their tenant base can afford. If wages don’t keep pace with inflation, multifamily owners could face an income plateau, exacerbated by the next factor that affects multifamily real estate we will address …

Rising Expenses

Rising costs affect both sides of the ledger. Even as market rents increase, so too do the price of materials, labor, utilities, services, and other expenses needed to keep the property operational.

In the circumstance outlined above — wages failing to keep pace with inflation — rents might not increase fast enough to keep pace with rising expenses. This effect is particularly pronounced in Class A, luxury, or “core” multifamily assets, which have little headroom to raise their rents to begin with.

If rent increases can’t keep up with rising expenses, you may see reduced net operating income (NOI), which can be a problem for realizing increased valuation … but there’s a solution to this problem, as we’re about to see.

Rising Valuation

Real estate is a real asset, more in the class of commodities like gold and oil than paper assets like stocks or bonds. Like other real assets, it tends to hold intrinsic value — value that persists despite hype or market sentiment.

What does this mean? Inflation makes money less valuable … but real assets remain equally valuable. There’s usually more demand for real estate during times of inflation, as investors rush to place their cash in real assets.

This demand manifests in the form of shrinking cap rates … and, as such, rising market value. Even if your NOI doesn’t grow — even if it shrinks a little — multifamily real estate tends to become more valuable during periods of inflation. Think of it as yet another good that gets more expensive … and you, as the owner, get to profit from it.

Reduced Value of Debt

One of the biggest benefits of real estate in times of inflation is the debt. As the dollar loses value, so does the remaining balance of your mortgage. So, too, does your mortgage payment.

Just because the dollar has become less valuable doesn’t mean your lender can demand a higher mortgage payment or bump up your principal balance to compensate. No, that balance and that payment typically stays the same, despite eroding in value due to inflation.

So while market rents and property values increase, your debt and debt service stay the same for fixed rate debt … which means your net worth and your cash flow grows!


More net worth … more cash flow … what more could you ask for from an investment? If you want to take advantage of the benefits of multifamily real estate during times of inflation, reach out to All Aboard Capital today. We do the hard work — finding appropriate multifamily properties, evaluating them, and then presenting our work as an opportunity for investors like you.